TIRANA, Feb. 9 – The Albanian government has lowered its expectations of extra income from the fight against tax evasion after an aggressive nationwide campaign launched last September formalized thousands of previous informal business and workers, but failed to boost revenue because of sluggish domestic consumption.
In its 2016-2018 programme of economic reforms, the Albanian government says it expects the ongoing campaign against informality, estimated at about 30 percent of the GDP, to generate 9.3 billion lek (€66 million) for 2016, a small amount compared to initial expectations of more than $300 million in 300 days announced in Sept. 2015 at the start of the nationwide operation.
The government says the fight against informality will lead to increased imports of cigarettes, following their drastic decline due to a hike in excise duties, and higher imports of fuel, whose prices in Albania remain among Europe’s highest due to the high tax burden. The reduced smuggling in both cigarette and fuel imports is expected to bring an extra 2.9 billion lek (€20 mln). The government also expects an extra 3.2 billion lek (about €23 mln) in internal VAT collection following a sharp increase in the number of registered businesses and their restructuring.
The fight against informality is estimated to have formalized 30,000 businesses and 40,000 workers in September- December 2015.
Yet, Albania’s public finances failed to meet targets by about 20 billion lek (€141 million) in 2015 when the budget was revised three times, including twice in December, according to a report by the finance ministry.
Sluggish domestic consumption, non-performing loans at 20 percent preventing credit growth and an asylum exodus which saw more than 50,000 Albanians leave the country last year are having a negative impact on the Albanian economy which has been struggling with growth rates of 1 to 3 percent in the aftermath of the global financial crisis. The country’s public debt has also sharply increased to above 70 percent, becoming a burden on much-needed public investments due to its high cost.
