Businesses denounce negative impacts from fiscal package

TIRANA, Feb. 26 – With almost two months since a new fiscal package has been in force, around two-thirds of businesses say it has had negative impacts on their activity, according to a survey by the Konfindustria Association.
“The increase in corporate tax by 5 percent to 15 percent weakens Albania’s competitiveness in the attraction of foreign direct investment compared to regional countries (the region has a flat tax of 10 percent) and is a push for the outflow of Albanian capital in more attractive foreign markets. Some 22 percent of big businesses say they could consider transferring their activity out of Albania,” says the association.
Konfindustria’s administrator Gjergj Buxhuku says the shift to progressive taxation based on turnover leaves room for evasion in declaration of income.
The Association proposes the return to flat tax and placing businesses with annual turnover of more than 2 million lek in the VAT scheme.
Surveyed businesses say the changes to the fiscal package targeted only increasing budget revenue and not easing the fiscal burden on businesses.
The difficult situation businesses are facing is unveiled by profit tax dropping by 10.3 percent and imports of machinery and equipment dropping by 3.7 percent as an indicator measuring private investments, according to 2013 data by the Finance Ministry and INSTAT.
Meanwhile, lending remains at negative growth of around 3 percent for both businesses and households as bad loans stand at a record 25 percent.
The new Socialist Party-led Albanian government, which took office in September 2013, has adopted a new fiscal package which starting January 2014 switches Albania to progressive taxation, lowering personal income tax for low and middle-income households but increasing corporate income tax for mid-sized and big businesses to 15 percent, a move strongly opposed by the business community.
In addition, an increase in fuel taxes by 10 lek/litre starting January 2014 is expected to take fuel prices at a record high of 200 lek/litre (Euro1.4), further increasing costs for both businesses and households. Government has also doubled property taxes and imposed higher excise rates on tobacco.
The new fiscal package has been drafted with the assistance of the IMF, which has returned to Albania with a new three-year mission and a Euro 300 million loan which will be used to pay off unpaid bills to the business community. The IMF concluded its permanent mission to Albania in January 2009 when relations with the Fund were reduced to an advisory role.