IMF against tax removal & fiscal amnesty proposals

Tirana Times
By Tirana Times July 2, 2020 12:52

IMF against tax removal & fiscal amnesty proposals

TIRANA, July 2 - The International Monetary Fund expressed concern over the Albanian government's tax amnesty draft law as well as its proposal to remove the profit tax for certain small businesses until 2029.

On Wednesday, an International Monetary Fund (IMF) team led by Yan Sun, concluded a staff visit to Albania which lasted from June 25-July 1. At the end of the mission, Sun expressed concern towards the government's proposal to remove the profit tax until 2029 for all businesses with annual turnovers up to 14 million Albanian lek and VAT for all businesses with annual turnovers up to ALL 10 million.

"Support for people and firms hurt by the shocks is warranted, but needs to be temporary, targeted, and transparent, embedded in a credible and prudent medium-term fiscal framework. Thresholds for business profit tax and VAT should be unified at a carefully designed level, consistent with MTRS objectives. Setting the threshold too high for too long would erode the tax base and undermine tax compliance," Sun said.

The IMF also advised against the tax amnesty proposed by Rama's government earlier this year "as it might undermine tax compliance." According to Sun, the government needs to establish effective systems to detect tax evasion and to prevent opportunities for money laundering and corruption.

The Governor of the Bank of Albania, Gent Sejko, said yesterday that "indirect data of the second quarter suggest that the blow has been further strengthened. Exports of goods decreased by 33 percent during the first two months of this quarter, in response to declining foreign demand and impediments to circulation. Also, imports were reduced by about 30 percent, signaling the rapid slowdown in consumption and investment in the country, while budget revenues shrank by about 30 percent in the first two months of the quarter, reflecting the overall decline in economic activity. "

According to the IMF, the BoA's monetary policy is appropriate as it will aid in absorbing the shocks and restoring external balance. "However, its resilience will be tested and pockets of vulnerabilities, including a likely rise of the still high stock of NPLs, will need to be closely monitored, assessed, and managed. Maintaining loan classification and provisioning rules is important for appraising banks' potential losses as accurately as possible," Sun added.

As regards the future of the Albanian economy taking into consideration the current pandemic, the IMF stated that Albania's economy is expected to contract sharply in 2020 and rebound in 2021. However, "uncertainty is high."

Tirana Times
By Tirana Times July 2, 2020 12:52