TIRANA, Oct. 12 – A Georgian consultant has been hired by the Albanian government to assist in the customs administration, raising questions about the renewal of the contract with U.K.-based Crown Agents whose performance in Albania has been criticized because of failing to increase customs income.
Georgia-based Reformatics has been invited by the Albanian government to assist the country’s tax and customs administrations which have failed to meet revenue targets this year due to a sharp drop in international oil prices affecting royalty collected from oil production and a decline in household consumption.
In a meeting with the American Chamber of Commerce in Albania last week, representatives of Reformatics consulting firm were informed of the key issues businesses face in the Albanian customs system to take them into account as part of the consultancy they will offer the Albanian government within the Albanian customs project.
While the advisory assistance Reformatic is providing does not replace the work Crown Agents is currently carrying out, the future of the British consultant remains in doubt as its contract with the Albanian government expires in early 2015 and government officials have indicated they do not plan to renew the costly contract.
Established in 2012 by a team of ex-government officials from Georgia, Reformatics is led by former Georgian Prime Minister Nika Gilaur and his former chief advisers.
The Republic of Georgia is well known for successfully reducing corruption and increasing tax revenue by simplifying its tax code and procedures. The American Chamber of Commerce in Albania says it has encouraged the Albanian government to consider the factors that led to Georgia’s success in decreasing informality as well as improving its “Doing Business” and “FDI attractiveness” rankings as it seeks to improve the economy.
Reacting to media reports that the Georgian consultant was replacing Crown Agents, the British consultant dismissed the reports as untrue, saying that “Crown Agents remains committed to supporting the Albanian government in its continuous efforts to reform the public administration and fight evasion and corruption everywhere.”
With four months to go before its two-year contract expires, the Crown Agents says it identified 3,500 cases of tax evasion worth 13 million euros during its 20 months of assistance to the Albanian government.
Earlier this year, the Albanian government informed the IMF that work by the external consultant on customs administration will continue even this year, but the big boost in collections expected at the time of signing has not yet been realized.
Under a deal signed in late 2013, the Albanian government agreed to pay UK-based Crown Agents Euro 8.5 million during the first two years of its operation in Albania to assist the country’s customs administration improve its performance by fighting corruption. The contract sparked heated debate with the opposition Democratic Party which describes the deal as abusive and unnecessary.
The contract with Crown Agents envisaged the UK-based company will be paid Euro 4.25 million per year, a total of Euro 8.5 million in the first two years, with an option of renewal for a third year. The contract also foresees Crown Agents can lose 25 percent of the amount if it is not successful in increasing customs revenue. The company has been stripped of all taxes during its operation in Albania, including profit tax, personal income tax for its experts, VAT, and social security and health insurance, which sparked fierce reaction by the opposition.
Public finances failed to meet the target by 61 million euros in the first half of this year when Albania held local elections forcing mid-year budget cuts.
The poor performance in the first half of this electoral year forced the Albanian government to cut its 2015 spending by €114 mln while the International Monetary Fund postponed its new loan tranche as part of a three-year Euro 331 million loan.
