The legal changes are expected to considerably reduce the number of people who will be taxed by 10 percent considering the average personal income in Albania stands below the USD 20,000 threshold
TIRANA, March 7 – With the fiscal amnesty postponed until March 31, government has also postponed the deadline for the first declaration of income and raised the compulsory declaration threshold to 2 million lek (around USD 20,000). The changes were approved in last week’s parliament session making it compulsory for any individual or business with annual gross income of USD 20,000 or more to submit an income declaration by Sept. 30, 2012. Under the previous law, only self-employed people with an annual turnover of up 2 million lek, and individuals with personal income of up to 200,000 lek would be excluded from the declaration initially scheduled to be made by April 30 this year.
The legal changes are expected to considerably reduce the number of people who will be taxed by 10 percent considering the average personal income in Albania stands below the USD 20,000 threshold. The law is mostly expected to affect people holding senior positions in the state administration, business entrepreneurs and individuals with high rental income.
The opposition Socialist Party which has proposed a progressive taxation system to replace the 10 percent flat tax in an effort to lower tax burden for people with low income has opposed government’s initiative.
“The tax administration and the financial system are not stable, and this is proved by the frequent change of economic laws,” said Socialist Party MP Mimi Kodheli.
While 2012 will be the first time Albanians declare their annual earnings, the Albanian government does not expect any important impact on revenues during the first years of its implementation, says the Finance Ministry in its 2012 draft budget report. Considered as a tool for the further formalization of the Albanian economy, the law which entered into force earlier this year initially obliged everyone working or making a profit to declare their annual earnings by April 30 of each year. According to the Ministry of Finance, individual income statements will be made according to forms approved by the Ministry and must be submitted to the Regional Tax Department. An income statement will have to come from all citizens and residents who are employed or have income from other sources. This does not exclude foreigners who have income in the territory of Albania.
The legal changes come after experts were skeptical as to whether or not the government initiative will be implemented considering the lack of capacities it has to handle around 1 million individuals who would complete the tax declarations. Xhavit Curri, a tax expert, tells reporters that by 2012 individuals will have to fill out their income and expenditure declarations for 2011, but very few people have been informed of this obligation and no awareness campaign has been launched. According to financial experts, it will be difficult for Albanians to adjust to the system and for the government to implement the complicated deductible and refund system it has approved.
