TIRANA, Nov. 23 – The Albanian government expects to collect a mere €19 million from new tax hikes on both households and businesses in 2016, a small amount compared to the 2015 fiscal package when it forecast an extra €112 million.
In its 2016 fiscal package which has been submitted to parliament for approval, the government expects to collect an extra 2.6 billion lek (€18.7 mln) in tax hikes on vehicles and car insurance, mining royalty, property and social security contributions.
The highest extra income is expected to come from the increased tax burden on a series of self-employed professionals such as lawyers, notaries public, doctors and engineers. Starting January 2016, they are expected to pay social security contributions at a maximum wage ceiling of 97,000 lek (€692) compared to starting from a minimum of 19,400 lek (€138) currently, with tax authorities hoping to collect an extra 1.1 billion lek (€8 mln). Experts expect the hike to translate into higher service fees for consumers.
The government also expects to collect an extra 1.1 billion lek on increased taxes on insurance premiums and the newly defined luxury cars. The tax rate on insurance premiums is expected to increase to 10 percent in Jan. 2016, up from 3 percent currently with a positive effect of 700 million lek (€5 mln) to the state coffers.
Starting January 2016, personal five-seater vehicles with a cylinder volume of more than 3,000 cm3 will for the first time be considered as luxury cars and have to pay a registration fee of 70,000 lek (€500) and an annual tariff of 21,000 lek (€150). The changes are expected to have a positive effect of 400 million lek (€2.9 mln) for 2016.
The application of the mining royalty on coal, bitumen and construction materials at fixed rates based on their quantity in tons and cubic meters to compensate for lower revenue from the sharp cut in base metal prices is expected to bring an extra 400 million lek in income. The rates on the main metallic minerals and oil and gas have been left unchanged from 4 to 10 percent of the sale prices.
The government says suspending the increase in the excise rate on tobacco will have a positive impact of 700 million lek (€5mln). Last year’s excise rate hike is estimated to have had a strong impact on lower imports and favored smuggling and small purchases from neighboring countries applying lower excise rates, the government says.
The application of a fixed 1 Euro accommodation tax is expected to have a positive effect of 425 million lek (€3mln).
In its 2016 fiscal package, the Albanian government says that apart from buildings and agriculture land, it will also tax non-agricultural land classified as available for construction ranging from 1,400 lek (€10) per hectare in remote municipalities to 5,600 lek (€40) per hectare in key municipalities. That is expected to have a positive effect of 180 million lek (€1.3 mln) based on an estimated 50,000 hectares of land available for construction.
The lift of the profit tax on some 70,000 small businesses is the major concession the government has made for 2016 as a tough nationwide campaign again tax evasion is under way. The government expects the concession to have a negative effect of 1.3 billion lek (€9.4 mln) on the state budget.
Some 70,638 small businesses with an annual turnover of up to ALL5 million (€36,000), accounting for 80 percent of total enterprises, will benefit from the removal of the profit tax. Another 2,332 businesses with a turnover threshold of ALL5 million to ALL8 million (€57,000) will also have their profit tax reduced to 5 percent, down from a current 7.5 percent starting Jan. 2016.
Currently, micro businesses with an annual turnover of up to ALL2 million (€14,370) pay a fixed annual figure of 25,000 lek (€180) in profit tax, compared to 7.5 percent for a turnover of 2 to 8 million lek (€14,370 to 57,484) and a corporate income tax of 15 percent for a turnover of more than 8 million lek.
In their first reactions to the new fiscal package, business representatives have voiced concern over the increase of the excise rate on domestically produced beer and the reduction of the rate on imports as damaging local production which accounts for 90 percent of total consumption. The tourism industry has also expressed concern over failure of the new fiscal package to reduce VAT on tourism after continuous promises to review it. Currently, the tourism sector in Albania pays a fixed 20 percent VAT, the same to all other services and goods compared to a regional average of below 10 percent, which local operators say is affecting the competitiveness of one of the country’s most promising industries.
In last year’s fiscal package, the government expected to collect an extra 16 billion lek (around 112 million Euros) in higher taxes on non-wage income, fuel and tobacco in 2015, but failed to meet expectations due to sluggish domestic consumption and lower international oil prices resulting in a mid-year budget cut.
