Experts skeptical of fiscal amnesty, progressive tax implementation

TIRANA, May 17 – Financial experts are skeptical about the positive effects the recently approved partial fiscal amnesty will produce for citizens, businesses and the state budget. Zef Preci, the director of the Albanian Centre for Economic Research stated that the lack of political consensus between government and opposition means the amnesty will remain only a legal step without any serious impact in collecting the expected monetary sums in the state budget or psychologically freeing private enterprises or interested citizens.
In an interview with the daily Mapo, Preci added that the initiative remained an effort by the majority in the frame of the electoral campaign without having the ability to turn into a powerful instrument for normalizing the economic situation for businesses.
“I hope that in a quieter political situation, government and opposition will return to this topic with the goal of making use of this resource to accelerate the economic and social development of the country as well as strengthen and consolidate the fundamental institutions of the market economy,” said Preci.
The partial fiscal amnesty which the government approved last month was intended to begin implementation on a self-declaration basis from the first two weeks of May until the end of 2011. However, the May 9 local elections seem to have postponed the process as the Finance Ministry has not yet made available the application forms, nor has it given indications that it will.
Unable to receive the opposition’s consent, the bill failed to turn into a full amnesty law, whose approval required a qualified majority of 2/3, or 84 votes.
Under the approved bill, citizens and businesses are allowed to take advantage of the tax pardon to declare their unpaid taxes and hidden assets before harsher rules are imposed. Only businesses connected to current and former public office holders and those whose origin of capital is not legal business, i.e criminal activities and trafficking, are excluded from the law on the “legalization of capital and the pardon of part of tax and customs debts.”
The bill pardons unpaid tax obligations for individuals and small businesses which occurred before 31 December 2010. Big businesses can have their customs and tax obligations pardoned if they occurred before 31 December 2008.
When asked about the progressive profit tax initiative the government has introduced, Preci says that its application won’t be easy because of the fierce opposition it has encountered by big enterprises affected by the draft law.
The government says it is drafting a new law that will raise profit taxes up to 30 percent for big companies, changing the 10 percent flat tax system it has applied since 2008 into a progressive profit tax. The Ministry of Finance sources say the 10 percent profit tax will remain in force only for companies with a profit rate of up to 20 percent. The profit tax for companies with profit rates from 20 to 30 percent will increase to 20 percent, while companies with a profit rate of more than 30 percent will be taxed at 30 percent.
A study by the Finance Ministry shows that 15 out of 100 big companies operating in Albania apply profit rates of more than 20 percent. Data show 6 of the surveyed companies had profit rates from 20 to 30 percent while 9 others applied profit rates of more than 30 percent.