TIRANA, Oct.16- Reference salaries will become the main compensating mechanism for the reduction of state revenues due to reduced taxes in the projected budget of 2008 which was discussed and approved by the Council of Ministers. Official indicators reveal that revenues from the social security and medical contributions for 2008 will be 51.1 billion lek, up from the 42.8 billion planned for 2007. The Ministry of Finance has explained that this increase is due to economic growth and the ongoing formalization measures implemented in the labor markets as well as referential salaries. The real effect though, seems to come from the last measure, the obligation of referential system of compensation, because the previous data reveals that economic growth has always been around six percent and the changes in the number of employed people has always varied between 3000 and 4000 annually. The reference salaries are being sued to calculate the social security contributions and will compensate 90 million out of the loss of 180 million from lower taxes on business. The tax on profits for business is being halved for 2008, a measure which will leave a deep deficit in the state budget.
Revenue taxation goes up
While taxation on profits is being lowered, revenues will be taxed more from the government. Revenues from these taxes are expected to reach 16.3 billion lek, from the 13 billion predicted in 2007, an increase of almost 25 percent jumping from 0.95 percent of the GDP to 1.51 percent. The higher revenues from taxation of personal income in 2008 is a result of the flat tax and the lower levels of informality and fiscal evasion. The flat tax has already been showing its effect in the second half of 2007. According to the calculation of the projected budget of 2008, the revenues from taxation of personal income will be 12 billion lek more than the previous year, which means that for 400.000 registered employees of the state and private sector, the government will extract during the entire year 300 more dollars out of their income. Total revenues for the state budget of 2008 are at the level of 283.7 billion lek or 26.4% of the GDP. Compared to 2007 the increase is 29.7 billion lek.
Higher deficit
The budget deficit for next year will reach 7.95 percent of the GDP from 4.77 percent in 2007. This is the result of the government borrowing from the private banking sector a total of 100 million euro for investments. This financing will be secured at market rates and will be done through issuing Eurobonds. Capital expenditures or, as otherwise known as public investments, have been predicted at 105.9 billion leks out of which 38.9 billion will be secured from internal sources and 66.9 billion with foreign investment. This investment level is 51.1% higher than 2007. For the 2007 budget, public investments were 700 million euro. “Bechtel” alone will get 270 million euro next year, financed by loans of 230 million euro from two Greek banks and the rest from the state budget.
