TIRANA, July 5 – Thousands of businesses switched to passive status in the first half of this year, at a much faster pace compared to last year, in a situation apparently triggered by an increase in the tax burden for small businesses and rising competition from shopping centers and supermarket chains.
Data published by Albania’s tax administration shows the number of businesses shifting to passive status in the first half of this year rose to about 7,000, a 50 percent hike compared to the same period last year.
As a rule, businesses switch to the passive register in case of not operating or not submitting tax statements for 12 months or declaring the suspension of commercial operation with the National Business Center for a period of more than 1 year or indefinitely.
The higher pace in business closures comes at a time when the tax burden for more than 10,000 small businesses significantly increased following their inclusion in the 20 percent VAT system and competition has become much tougher amid sluggish consumption.
Last year, some 14,400 businesses switched to passive status, at an average rate of 35 businesses a day, but tax officials say there were also fictitious closures to escape tax penalties.
An earlier INSTAT report has shown more businesses have been closing down than starting in the past couple of years in Albania and it’s the formalization of dozens of thousands of farmers obtaining tax IDs that has kept the total number of active enterprises up.
Data shows there were about 25,000 new businesses registered in 2017, but the total number of active enterprises rose by only 1,773 to 162,452 and that was mainly thanks to another 5,143 farmers obtaining tax IDs to sell their products and benefit VAT refunds.
New legal changes that the Albanian government has approved in a mid-year fiscal package that is not going to become effective before next January ahead of the upcoming June 2019 local elections, will offer lower corporate income tax for some 10,000 medium-sized businesses as well as tax incentives on agribusiness.
Business representatives in Albania complain the high tax burden, widespread tax evasion, corruption and frequent changes of tax rules are the main doing business barriers in the country.
