TIRANA, Aug. 11 – The Albanian government is unlikely to renew its customs assistance contract with U.K.-based consultant Crown Agents which expires in early 2016 following poor performance in tax collection this year resulting in a budget cut.
Finance ministry sources quoted by local media this week say the government will not renew its costly Euro 8.5 million two-year deal with the British consultant which has also been given a percent penalty in its latest installment.
Earlier this year, the Albanian government informed the IMF that work by the external consultant on customs administration will continue even this year, but the big boost in collections expected at the time of signing has not yet been realized.
“The main problem lies in inconsistent application of valuation rules and procedures, and informality,” said the government in its letter to the IMF which is assisting the Albanian government in reforms supported by a three-year Euro 331 million loan.
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 where it will assist the country’s customs administration improve its performance by fighting corruption. The contract sparked heated debate with the opposition Democratic Party which describes the deal as abusive and unnecessary.
The contract with Crown Agents envisaged the UK-based company will 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 contract also foresees Crown Agents can lose 25 percent of the amount if it is not successful in increasing customs revenue. The company has been 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.
Public finances failed to meet the target by 61 million euros in the first half of this year when Albania held local elections forcing mid-year budget cuts.
The government had earlier warned the poor performance of public finances could force it to revise its overoptimistic budget downward later this year on lower royalty collected from oil production, lower imports of fuel and tobacco and a rising number of VAT-free imports of machinery and equipment.
