All citizens to declare income by April 2012

TIRANA, March 14 – By April 2012, all Albanian residents will have to declare their income just as senior state and government officials do, in order to be taxed accordingly and benefit from a complicated deductible and refund system which the government has approved. The Finance Ministry’s ordinance has already been published in the Official Gazette where the application forms have also been made available.
The government proposes that people who earn fewer than 800,000 lek per year will be able to have deducted medical and education expenses from total income on which they pay taxes by providing receipts.
The government’s decision has specified what it calls deductible expenses though it does not take into account many of the basic expenses of Albanians such as housing loans, loans for cars, others loans and travel expenses paid in monthly installments.
The government approved the decision that all citizens must declare their revenues so that everyone can pay income taxes. The total revenue collected by the family will be taxed 10 percent under certain limits and with deduction of certain expenses.
As for the income category, it can come from wages, shares of a company, bank deposit interest and other income on which no taxes were applied before.
Finance Minister Ridvan Bode described the changes as a necessary reform and a standard that has to be met under Albania’s European Union integration.
“This process has already been carried in a number of regional countries and needs to be implemented even in Albania, not only because we are closer to EU membership, but also because the necessary administrative and technical infrastructure have been put in place to handle such reform and huge undertaking.”
Apart from the already existing rules for individual taxpayers, the changes to the law also cover self-employed people– both residents and non-residents.
Under the proposed project, aimed at increasing tax revenues and formalizing them, each individual or self-employed person, resident or non-resident in Albania, will have to annually fill out a form and submit it by the end of April.
Self-employed people with an annual turnover of up 2 million lek, and individuals with personal income of up to 200,000 lek will be excluded from the declaration form which will carry the person’s ID number. The unification will turn the personal ID number into a fiscal code making it easier to identify tax payment.
The annual declaration includes data on gross income, deductibles, taxes paid during the year. Heads of households will also benefit from bonuses and tax deductibles for loan interest rates, health expenditures not covered by compulsory insurance for children, and people who are cared for.
However, the project does not foresee verification of data declared by individuals.
Minister Bode said the changes would also help the government fight organized crime. The opposition Socialist Party described the move last year as premature.
Experts are skeptical if the government initiative will be implemented considering the lack of capacities to handle around 1 million individuals who would fill in tax declarations.
Xhavit Curri, a tax expert, tells reporters that within 2012 individuals will have to fill in their income and expenditure declarations for 2011, but very few people have been informed on this obligation and no awareness campaign has been launched.
“Starting from this year, taxpayers will have to save their receipts, but no one has told them about this, not to mention the fact that the majority of points of sales still do not have a cash register and do not issue receipts.”
Albania is trying to implement a model applied in many developed countries, but experts warn that it might take some time for people to get used to the new system.
According to financial experts, it will be difficult for Albanians to get used to the system and for the government to implement the complicated deductible and refund system it is proposing.