Business organizations say fiscal amnesty could introduce billions of euros into economy. Opposition not happy with pre-election decision.
Tirana Times
TIRANA, March 14 – Albania’s government is drafting two bills that would offer amnesty on business fines, unpaid taxes and undeclared assets. The move was made public by Prime Minister Sali Berisha last week.
There has been much discussion on a possible amnesty for the last two years.
What makes it more possible at this moment is the fact it is being done or pledged to be done ahead of May local elections as a way to woo voters, especially small business that make most of the vote-related targets in the impoverished country of more than three million people.
“I would feel very pleased if we applied a fiscal amnesty for all businesses, except those linked to current or former office holders. These businesses would not be included in the amnesty,” said Berisha at the cabinet meeting last week.
But that move would need three fifths of the vote in parliament, which does not seem possible at this moment when the opposition Socialists have been refusing to vote on legislation requiring more than a simple majority unless the government agrees to investigate 2009 elections.
The opposition Socialist Party of Tirana Mayor Edi Rama immediately reacted considering such an act as another proof of the government’s links to the Mafia businesses and another effort the governing leaders are doing to legalize their undeclared assets.
The government is just hailing its successes not only in the economy but also in the fight against corruption, which it blames the opposition when in power. Berisha has said that his government has collected 5.2 billion dollars more from 2004-2008 than in the prior four years thanks to its strategy of low taxes. He continues to acknowledge that “there is evasion, fines are applied, penalties and income is hidden.”
The electoral campaign that both opposing political groupings have already started is gaining momentum, though it officially starts only 40 days ahead of the polls.
Berisha instructed the finance ministry that unless the opposition Socialists would agree to a total amnesty, they should draft bills for pardoning fines and late payments as well as an amnesty that would be broader. Businesses want the government to agree to legalize hidden assets and undeclared income, a move that experts say could bring about $4 billion into the mainstream economy. Berisha asked the Ministry of Finance to prepare as soon as possible the draft which should exempt the businesses with political support.
To be true, after two decades of the market economy in the post-communist tiny Balkan country a fiscal pardon is not implemented, unlike the other former communist regimes in eastern Europe.
He also asked the finance ministry to prepare a second variant of forgiveness, if the opposition does not vote the first option.
In all this political fight there is one main topic which both, the government and the opposition, should really deal with if they mean their words נfighting corruption.
That remains a shortcoming or Albania’s Achilles’ heel during all its post-communist transition. Corruption remains a shortcoming that is mentioned in all the international reports prepared on the country.
That is focused more recently following the opposition’s accusations against some cabinet members, including the premier. That is mentioned at a time when both political wings try to gain momentum, to show their willingness to their voters on the real fight they want to make to that problematic issue. The governing Democrats passed a law in which they willingly lift their immunity, something which was turned down by the opposition just as a show, or another effort to put the opponents under pressure. The opposition, on its side, speaks of constitutional changes in order to amend the laws on their immunity, including that of the judiciary.
The international diplomats have made it clear that while many European countries offer various types of limited immunity to certain government officials, Albania stands alone in Europe in limiting almost all investigative activity.They urge Albanian politicians to show their political will on the proper amendments.
“Although immunity is guaranteed by the constitution, the procedural code could be changed in order to allow investigations of officials with immunity,” Prosecutor-General Ina Rama said at a recent meeting, adding that “The prosecutor should be able to use special investigative means even against people with immunity in order to gather evidence.”
The current crisis in Albania is driven by the lack of efficient democratic institutions that causes corruption, inequality and instability in society. While this is a quick explanation of political impact, on the other hand, the phenomenon of the economic downturn has certainly had a decisive role in diverting the route recently.
The government has made some good steps in the fight against corruption and also the flat tax system. That is a good effort to get the country’s economy back on track. But the global economic crisis, though not directly negatively influencing the tiny Balkan country, would naturally give its impact.
The indicators of growth in comparison with other countries give credibility to Albania. The phenomenon of remittances as an indispensable source of GDP is getting smaller and the development of economic institutions is the basis of the rules of the game that run a society.
A fiscal amnesty could likely give good results. But Albania lacks a strong political and institutional stability and credible and sustainable rules that allow job creation and long-term investments. It is still considered as the poorest state in Europe, (unless including Moldova and Georgia in the continent.)
In 2011, the UN report on “World Economic Situation and Prospects” quotes the Albanian economy among the most prosperous in the area following the same growth indicators in comparison. Albania is part of the “Economies in Transition” (along with Montenegro, Bosnia and Herzegovina, Croatia, Serbia and the Republic of Macedonia and the CIS, the Commonwealth of Independent States, or ex-USSR). This means that the group, which has similar economic conditions based on GNI (gross national income, that is what does the country really manufacture after subtracting the various flows, including remittances), has an “upper middle income”. It is distinguished by the groups of developed economies with high income-as well as from developing countries with low and middle income and from less developed countries with low-income.
A possible fiscal amnesty comes at a time when the government is pledging to turn the country into a developed one by 2017. Is that possible? Or just another electoral promise?
For the moment the fiscal amnesty would really raise some doubts on its effects.
Albania is a country with a big undeclared property or income. Albania is at crossroads of many illegal trafficking and close to Italy, the cradle of the Mafia, and also near Western Europe. That means that illegal trafficking in this country is hiding a lot of money that would immediately turn into legal with a fiscal amnesty. Would that be acceptable to the western partners? Now Albania is a NATO member and is also looking for becoming a member of the European Union. That is not near and no one could really set a date on that. But that is a possibility and the country should work a lot, in many directions, to convince a tired Europe.
Does a fiscal amnesty help that?
Moreover, is that the right path Europe would want this country to work for?
Or that is only an electoral pledge that would attract a lot of votes and then left aside following pressure or surprising results it could give.
In other words, has the government really studies that a fiscal amnesty could be a good thing to do in this country, that would help its progress?
Election pledges or rushed decisions ahead of them have not shown to be well-founded in this country.
It would be advisable if the government would first ask international institutions it has always been advised with, like the International Monetary Fund, or the European Commission it is trying to arrive at.
