TIRANA, March 1 – The proposed concession on an electronic platform for the collection of the key value added tax could cost the Albanian government millions of euros.
Finance ministry data shows the internal VAT collected by the tax administration rose by 10 percent in 2014 and accelerated to 15 percent in 2015, 4 percent above the threshold the Albanian government has set for the concessionaire in order to benefit a success fee of up to 90 percent for the extra income.
The net VAT after deducting refunds collected by the tax administration in January 2015 also accelerated to 13 percent, 2 percent more than the proposed threshold on internal VAT.
Calculations show that the concessionaire would have benefited 1.1 billion lek (€7.8 mln) in 2015 for the extra income above the 11 percent threshold.
The situation has also been favoured by the nationwide campaign against informality which since Sept. 2015 has increased penalties on tax evasion, pushing thousands of businesses previously operating informally to register with the authorities.
Plans to award a 10-year concession on the value added tax, the country’s key tax levied at a fixed 20 percent rate on almost all goods and services and accounting for about a third of total government revenue, have sparked fierce reactions by experts and business representatives. Government officials say the concessionaire establishing a new technological platform, worth about Euro 9.6 million, will be selected through an international tender in a bid to ensure better tracking of the VAT chain and improve its collection. The Albanian government says the concessionaire will benefit bonuses only for an annual increase of more than 11 percent in internal VAT income, otherwise it will only be paid about €957,000 a year which is the value of total investment divided by 10 years. The concern is that the concessionaire will get 90 percent of the extra income for an increase between 11 to 15 percent and 65 percent for 15 to 17 percent threshold.
A Hong-Kong-based company is rumored to be behind the concessionaire after submitting an unsolicited bid. It is not known whether the Hong Kong-based M.POS company has received a bonus for the unsolicited bid which would give the company an advantage in the expected international tender.
An investigative report by BIRN news agency has unveiled that the rumored concessionaire is a shell company registered in tax havens such as the British Virgin Islands and Samoa and has little experience with VAT management.
Business representatives and economic experts have opposed the project as increasing costs and undertaken without being consulted with the business community, but the government insists the project will bring positive results.
“We are convinced on what we are doing and this is absolutely not a choice placing a burden on the public. We are not providing money to the company to establish the whole system and to carry out the investment, but we are telling them invest and undertake the risk,” Prime Minister Edi Rama has said.
In its latest reporting to the IMF, the Albanian government says that it will conduct analysis and consult the IMF before deciding on the VAT concession.
“Regarding a PPP for the VAT Collection Enhancement System, we will undertake a value-for-money analysis before entering into a tender, and any related decisions will be taken in consultation with IMF staff,” says the government.
VAT collected by both the customs and tax administrations, dropped by a slight 0.1 percent to 113.6 billion lek (€804 mln) in January-November 2015 compared to the same period in the previous year, but yet accounting for a third of total government revenue.
