TIRANA, July 14 – Albania’s Constitutional Court has turned down as incompatible some late 2015 legal changes that set reference wages on self-employed professionals increasing social security contributions by three times. The legal changes, strongly contested by private professionals in the law, health and engineering services, were challenged to court by the Bar Association which claimed the new rates promoted inequality, tax evasion and bankruptcy.
“The Legal changes create new elements of inequality, violating the principles of equality and solidarity and making unjustified differentiation over similar occupations in different territorial locations. Although the contributions increase 3-fold, the number of contributors is small at 4,000 to 5,000 people,” Sotiraq Dhamo, an accounting expert had argued in court.
Under a decision made on Jan. 21, the Albanian government set monthly reference wages ranging from 40,250 lek (€288) to 88,800 lek (€636) based on the type of profession and the area where they operate in the newly established 61 municipalities under the territorial reform.
Social security contributions currently stand at 24.5 percent, of which 15 percent is paid by employers and 9.5 percent by employees. Meanwhile, health insurance contributions are at 3.4 percent, shared by 1.7 percent between employers and employees.
Earlier this year, the Constitutional court also turned down a heavy fines law increasing fines on tax evasion by up to 50-fold as running counter to constitutional principles and “disproportionate” penalties to income and offences committed.
The new changes to the tax procedures law envisaged fines of up to 10 million lek (€71,000) on big businesses operating in the wholesale trade for not issuing tax receipts, compared to a previous 200,000 lek (€1,411). Fines on small businesses were set to increase 10-fold from 50,000 lek (€353) to 500,000 lek (€3,529) starting Nov. 12.
The legal changes were undertaken the ruling Socialist Party-led majority in late 2015 as part of nationwide campaign to tackle widespread informality. The campaign although formalizing thousands of businesses previously operating informally has failed to produce the expected revenue increase due to sluggish consumption and uncertainty by businesses.
