TIRANA, Feb. 11 – The Albanian government has officially announced the termination of its two-year €8.5 million customs assistance contract with UK-based Crown Agents, saying that will no longer continue cooperation with the consultant which it described as successful, although the costly deal failed to provide the expected boost in customs revenue.
In a statement issued this week, the finance ministry said it will not use its option to extend its initial contract for another year as initially envisaged in the deal signed in late 2013 soon after the Socialist Party-led government came to power. The ministry said the two-year deal was successful in improving the detection of fraud, effective risk-based controls, human resources and the level of integrity and ethical standards.
“We worked hard on suspected corruption cases and were active in revenue collection. Some 17,000 inspections were carried out, identifying 4,500 cases of violation,” said the finance ministry, describing the Crown Agents consultancy as essential for the customs administration’s ongoing work.
Reacting later this week, Crown Agents claimed it had exceeded its operational targets and had not been a burden to Albanian taxpayers during the 2-year deal.
“We are very pleased to report that all of our operational targets were not only met but significantly exceeded – most notably the number of detections of fraud and malpractice which was more than 4,500. We have also been able to identify and collect significantly more revenue, as a result of our detections, than the actual value of the contract. There has therefore been no effective cost to the lawful Albanian taxpayer,” the consultant said in a statement.
Last October, Crown Agents said it had identified 3,500 cases of tax evasion worth 13 million euros during its 20 months of assistance to the Albanian government after media speculations that a Georgian consultant had been hired to replace it because of poor performance.
“The revenue increase did not only depend on the consultant. It was a consultancy contract and the work had to be carried out and will continue to be carried out by the customs administration,” says the ministry.
The contract, which was highly criticized by some economy experts and the opposition as too costly, failed to yield its expected results of increasing customs revenue by 1 percent of the GDP or about 100 million euros.
Customs income increased by only 8 percent (€81 mln) to 105 billion lek in 2014 but failed to meet the target by 5.6 billion lek (€40 million) during the first year of the Crown Agents assistance. The situation received a blow in 2015 when fueled by record low international oil and base metal prices, customs revenue failed to keep even the previous year’s pace.
Customs income during the first 11 months of 2015 dropped by 7.4 billion lek (€53 mln) compared to the same period a year earlier and undershot the target by 9.5 billion lek (€68 mln), according to finance ministry data.
The customs administration collects the key value added tax on imports, the excise duties, the mining royalty and the customs tax.
“Crown Agents’ role has been helpful and we appreciate it, but it is no secret the cooperation will no longer continue,” Finance Minister Shkelqim Cani hinted earlier this year.
In a recent TV interview, minister Cani admitted smuggling and tax evasion remains a problem in the customs administration, especially with the drastic cut in cigarette imports.
Under a deal signed in late 2013, the Albanian government agreed to pay UK-based Crown Agents Euro 8.5 million during the first two years of its operation in Albania to assist the country’s customs administration improve its performance by fighting corruption.
The contract with Crown Agents which entered into force in February 2014 envisaged the UK-based company would be paid Euro 4.25 million per year, a total of Euro 8.5 million in the first two years, with an option of renewal for a third year.
The company was stripped of all taxes during its operation in Albania, including profit tax, personal income tax for its experts, VAT, and social security and health insurance, which sparked fierce reaction by the opposition.
In an annual conference last month, the customs administration blamed its poor performance in 2015 on the sharp cut in international oil prices affecting oil production and exports, a decline in electricity imports because of the favorable situation in the domestic hydro-dependent power generation and a drop in imported agriculture products due to increased domestic production.
