Business representatives recommend the reduction of VAT from 20 percent to 10 percent for certain food products and activities related to the tourism industry
TIRANA, Nov. 19 – Albania’s business community has compiled a list of requests to the Albanian government demanding a differentiated value added tax, currently at a fix 20 percent on all products and services, the removal of reference prices in customs offices and less physical contact with the tax administration. “We recommend the reduction of VAT from 20 percent to 10 percent for certain food products and activities related to the tourism industry. The reduction of VAT for the tourism industry will give an impetus to its development,” says economic expert Zef Preci who is assisting the initiative launched in cooperation with the Center for International Private Enterprise (CIPE).
The Tourism Association has continuously demanded a cut in the value added tax (VAT) from 20 percent to 8 percent and a decrease in accommodation taxes paid to local government units from 5 to 1 percent. “We are not competitive with regional countries considering that the current VAT rate is 20 percent at a time when 20 out of 27 regional countries have a VAT rate lower than 10 percent,” association representatives said earlier.
The business community described government’s initiative to lift VAT on imports of machinery and equipment for investments of over 50 million lek as only partially stimulating to business because of supporting only big enterprises. The business community recommends that the 20 percent VAT is lifted on imports of all machinery despite their value.
In its new fiscal package, the Finance Ministry proposes that the 20 percent VAT on imported machinery and equipment will be lifted only for investments of Lek 50 mln (Euro 351,000) or more. However, the garment and footwear industry, the country’s top exporter which this year has been suffering crisis impacts from lower demand by crisis hit EU partners Italy and Greece, will have VAT on machinery imports removed for all kinds of purchases.
Another request by the business community is also the elimination of physical contact with tax inspectors who have considerably increased the number of fines to businesses recently. “Consultations revealed that apart from the need of increasing the inspectors’ capacity, another solution to eliminate the direct contact with them, is improvement of the computerized system and its nationwide extension. The reduction and elimination of physical contact between tax offices and business administrators can also be carried out by increasing the use of electronic communication,” says expert Zef Preci.
The business community also recommends a more efficient appeals system by replacing current manual procedures which take up to three months with electronic procedures.
Businesses also demand the removal of reference prices which they consider as damaging competition and a source of abuse for customs officials. Reference prices are often a subject of debate between customs official and business representatives because of being higher compared to what businesses declare. The business community also requests the establishment of more Administrative Appeals courts considering that only one such court in Tirana is foreseen in the bill for the whole of Albania.
Corruption, the top concern for 98% of businesses
“Corruption and organized crime” is the key concern for an overwhelming majority of 97.8 percent of businesses operating in Albania, according to a survey conducted by the Business Albania Association. Second ranks the “poor efficiency of the tax administration and the judiciary system,” a major problem for 88 percent of surveyed companies. Third ranked blackmailing and arbitrariness by tax inspectors during controls, a problematic issue for 76 percent of businesses.
Barriers to lending and the numbers of permits required to open or close a business also remains an issue for 50 percent of businesses despite the opening of one-stop shops. Inability to enter new markets is also an issue for 31 percent of businesses.
Infrastructure, the customs service, and fiscal policies are rated as least problematic.
