Fiscal barriers, Albanian businesses investing abroad

Tirana Times
By Tirana Times August 11, 2020 01:18

Fiscal barriers, Albanian businesses investing abroad

TIRANA, Aug. 10 -More and more Albanian businesses are turning to the international market due to a number of fiscal barriers in the country.

According to the Bank of Albania, investments abroad reached 1.3 billion euros in 2019, expanding by 4 percent compared to 2018. This was as much as 10 percent of GDP during 2019 and as much as 19 percent of the amount of Foreign Direct Investments in the country.

During the first quarter of 2020, inflow of foreign investment in Albania dropped while outflow of Albanian investments abroad increased. The Bank of Albania reported that direct net investments amounted to 214 million euros compared to 285 million euros a year ago, thus declining by 25 percent.

Based on the "Incentive policies for investment promotion: Albania versus countries" comparative matrix, Monitor reports that Albania is the country with the highest fiscal burden for investors and has the lowest fiscal facilities compared to Macedonia, Serbia, Montenegro, Kosovo and Bosnia and Herzegovina.

The matrix shows that Albania has the highest fiscal burden in the region, as regards the profit tax (15 percent) - almost 50 percent higher than the regional rate (around 10 percent). With a 23 percent income tax rate, Albania accounts for the highest rate in the region as well.

Furthermore, Albania, as well as Serbia, account for the highest VAT level in the region at a level of 20 percent, while for other countries in the region, the VAT ranges from 17 percent to 19 percent.

The same goes for the level of social security contributions paid employers, which is at 15 percent in Albania and 17.9 percent in Serbia. However, Monitor points out that Serbia is proving more asserting than Albania in attracting foreign investment, "luring" foreigners with direct subsidies to employees.

On the other hand, Macedonia transfers all the burden to the employee, at a tax rate of 27 percent. This is one of the main reasons that Macedonia results in the lowest tax rate on the percentage of business profit (12.9 percent).

In an interview with Monitor, Endlers Kërtusha, administrator of Aquatic, is considering moving the 26m-euro project to build an Aquaponic farm that grows vegetables and fish at the same time through water, from Albania to Macedonia.

According to Kërtusha, Macedonia is a good alternative "due to bureaucracies and various delays caused by Albanian institutions." He added that Macedonia also offers greater support and incentives for innovative and sustainable investments, such as investment value, employment and fiscal facilities.

Even in terms of investment incentives, Albania proves weak compared to Montenegro, Macedonia and Serbia, although recently the government has encouraged investment in luxury hotels, excluding them from VAT and other taxes.

However, unlike Albania, countries in the region have functional free economic zones with very competitive incentives.

Tirana Times
By Tirana Times August 11, 2020 01:18