TIRANA, Oct. 7 – Albania’s central bank has warned the campaign against tax evasion could further affect consumption and fuel a price increase because of increased costs for thousands of businesses which have registered with tax authorities in the past few months.
Speaking in a TV interview, central bank governor Gent Sejko says the nationwide operation launched last September is expected to have the same effect on consumption as the campaign in the electricity sector to reduce thefts and collect accumulated unpaid bills.
The campaign in the electricity sector launched in late 2014 has brought the state-run electricity distribution operator more than 100 million euros in extra income.
Meanwhile, the operation against tax evasion and harsh legal measures has resulted in more than 19,000 businesses, the overwhelming of which small ones, registering with tax authorities to escape fines and seizure of goods. Thousands of others have closed down unable to afford paying taxes as consumption declines.
“The campaign in the energy sector was more sensitive because it affected a considerable part of the population and of course it had an impact on consumption. The same thing would also happen with the campaign against informality,” Sejko told Ora News TV in an interview.
“We are researching into how this would impact price increases. Practically, in case businesses pay taxes, they will logically attempt to transfer this cost to the end buyers,” says Sejko.
“Of course a price increase would affect consumption, but on the other hand, consumption itself is related to many other factors including psychological ones, such as the tendency to save or spend. This also depends on the optimism people have about the future, elements related to the economic situation etc.,” he added.
The governor says the prolonged crisis that Albania and the region have been facing has mostly affected spending on luxury goods such as purchase of cars and furniture.
“Households are inclined toward a saving tendency in times of crisis. It is a fact that Albania and the region do not find themselves in a situation of optimism or economic invigoration, but somehow in a stagnation situation. This is also reflected on households’ psychology,” said Sejko.
Household final consumption expenditure measuring consumer spending was down by 3.16 percent year-on-year in the second quarter of 2014, declining for the second quarter in a row
Speaking about the campaign against informality, Sejko says the operation is expected to have negative effects in the short-term because of the high level of informality in the Albanian economy but in the long-run will undoubtedly have a positive impact.
“In case this initiative is long-term, it will undoubtedly have positive effects on the economy which will be present starting next year,” said Sejko.
The governor says the campaign will also help reactivate the Tirana Stock Exchange because of bringing down informality.
The Tirana Stock Exchange was closed down in late 2014, twelve years after its establishment due to remaining inactive because of the small number of listed companies counted on the fingers of one hand and lack of interest because of the high informality of Albanian businesses.
“Under the current level of informality, we cannot activate the Tirana Stock Exchange which requires a clear and accurate listing of companies with certified balance sheets and real figures to understand the reality and increase the reliability. We cannot have a stock exchange in a situation when capital is not certified because the market would turn into speculative,” said Sejko.
