Opposition skeptical of tax amnesty as its votes remain decisive

TIRANA, March 21 – While the government is seriously considering making a tax amnesty reform by the end of this year, the opposition Socialist Party, whose votes are determinant to achieve a qualified 2/3 majority that the bill requires is skeptical about the project government has approved ahead of local elections and the periodical precedent it might set.
Arben Malaj, a former Finance Minister and current SP lawmaker says a tax amnesty ahead of the electoral campaign sets a political precedent and increases negative pressure on amnesties on the verge of every electoral campaign.
With only one month to go before the May 8 local elections, the Socialist Party says the fiscal amnesty project increases expectations of periodical amnesties and does not urge businesses to be regular with the payment of their tax obligations.
“If a tax amnesty is carried out, it should be conducted in full transparency and with close assistance by the international institutions so that they provide advice and certify the appropriate version for Albania,” added Malaj.
Meanwhile, Prime Minister Sali Berisha reiterated on Wednesday his invitation to the opposition to support the tax amnesty bill, warning that if the opposition does not give its consent the majority would move to approve on its own votes only the forgiveness of tax obligations and fines which is more limited than a full amnesty and excludes big businesses. Inviting the opposition to amend the law, Berisha said that under the full amnesty every tax obligation will be pardoned under a 3 percent tariff, including social and health contributions for employees and self-employed people. Meanwhile, companies are given the opportunity to declare their full wealth under a 6 percent tax, said Berisha.
Finance Minister Ridvan Bode reconfirmed during a meeting with businesses earlier this week government’s stance in favour of a full tax amnesty, saying that it would mobilize considerable funds and urge businesses to invest in different fields.
Considering the amnesty as a need to formalize the economy, Bode said the amnesty would be the end of the tax evasion, warning of stricter measures to punish violations after its implementation.
Asked on the possibility of including some 1,000 apartments which have not been legalized by the real estate registration offices, Bode said the issue could be solved under another law, inviting the Association of Constructors to make its concrete proposals.
Government says it intends to implement a full tax amnesty, excluding only businesses connected to current and former public office holders and those whose origin of capital is not legal business.
However, it remains unclear whether the opposition will support the government initiative just before the May 8 local elections. The opposition has not given its approval to any of the government bills needing a qualified majority of votes following the June 2009 general elections, which it claimed were rigged.
Few days after government initially announced it will start drafting the legal framework for the implementation of a full tax amnesty, the country’s business community represented by Konfindustria supported the initiative, saying that although delayed it would benefit businesses, consumers and the state, unfreezing large amounts. In a statement, Konfindustria says that it is completely unacceptable that in a 20-year period of such radical economic, fiscal and institutional changes, Albania remains the only country which has not implemented a real tax amnesty, especially when neighbours Greece and Italy continuously implement them. According to Konfindustria, delays are also affecting investment initiatives and keeping migrants’ savings abroad.
The business association says the best time to carry out this initiative is next summer, when thousands of immigrants return home to spend their holidays.
Finance Ministry says that the legalization of the informal businesses would produce positive results for the economy, unfreezing some USD $3 billion.
The International Monetary Fund has warned that a tax amnesty should nevertheless be only considered as a last resort, as it threatens to undermine future tax compliance and the credibility of the tax system.