TIRANA, April 23 – Agricultural cooperatives have been stripped of the 20 percent value added tax in a move that is expected to give a boost to a key sector of Albania’s economy suffering high levels of tax evasion, extreme farm land fragmentation and poor productivity.
A recent government decision says agricultural producers can be stripped of their VAT burden in case they come together in agricultural cooperation societies, known as cooperatives, legally recognized since 2012, but poorly developed because of their bias under communism when they were state-run.
Currently, individual farmers are included in the VAT system if their annual turnover is more than 5 million lek (€39), a provision that will continue to remain in force and be removed for agricultural cooperatives in order to encourage their establishment.
Agriculture ministry officials say cooperatives, which need at least seven members to form, will reduce administrative costs and offer them greater opportunities to benefit from subsidies as well as financing from banks and other agricultural support institutions.
Currently, there are only a few dozen agricultural cooperatives operating in Albania, a small number for a sector that holds huge potential.
Fragmentation of farm land into plots of little more than 1 hectare (1.2 ha on average split in 4 parcels) is a huge burden for the development of Albanian agriculture in terms of access to financing and investment, reducing their competitiveness due to high costs, a study supported by the Friedrich Ebert Foundation in Albania has shown.
Reminiscences of the communist past when farmers were expropriated and forced to work in state-run cooperatives until the early 1990s remains a huge burden for the development of agricultural cooperatives.
The study also recommended revising the high tax burden in agriculture by offering differentiated rates compared to other sectors. Farmers currently pay 15 percent in withholding tax for the sale and rent of their land, a 20 percent VAT rate on fertilizers and have no subsidies on fuel whose prices in Albania are among Europe’s highest despite the country having one of the lowest GDP per capita and purchasing power.
The Konispol area, in southernmost Albania just off the UNESCO World Heritage site of Butrint, is a perfect example of successful farmers’ cooperatives in citrus cultivation.
Since its establishment in 1995, the number of farmers who have joined forces to work together in Xarra has increased from a mere seven to 450 and production hit a record 18,000 metric tons.
The high level of informality in Albania’s agriculture sector, estimated at 70 percent, is the key barrier why Albanian farmers face difficulty in access to loans and international funding projects, mainly from EU funds, experts say.
Agriculture employs about half of the country’s population in Albania, more than in any regional country, but provides only a fifth of the country’s GDP, unveiling its poor productivity hampered by land being fragmented into small plots, poor credit and insufficient government support through subsidies.
Data published by INSTAT, the state-run statistical institute, shows Albania had about 464,000 people employed in the agriculture in 2016 sector where each person possessing land is considered self-employed in the sector, no matter what their income is.
However, only about 31,000 farmers, about 7 percent of the total, were registered with tax authorities at the end of 2016, compared to about 20,000 at the end of 2015, making them eligible to retirement benefits and subsidies the Albanian government offers.
The Konispol area, in southernmost Albania just off the UNESCO World Heritage site of Butrint, is a perfect example of successful farmers’ cooperatives in citrus cultivation.
Since its establishment in 1995, the number of farmers who have joined forces to work together in Xarra has increased from a mere seven to 450 and production hit a record 18,000 metric tons.
