TIRANA, Aug. 3 – Albania’s government is planning a major punitive campaign on business owners and managers who fail to follow tax rules, including prison terms for failing to issue proper receipts, according to government plans leaked to a local television station.
Businesses that operate without licensed fiscal cash registers will have their goods confiscated on a first infraction and the business owner and manager will be arrested on a second infraction, according to reporting by Vision Plus, a local private television station that first obtained a draft bill the government plans to pass in parliament in September.
Prime Minister Edi Rama said in a press conference last week that the government’s priority for the next 300 days will be to fight the informal economy.
“The measures will be very severe. Failure to use a fiscal cash register will be severely punished. Tax evasion will be treated as a criminal offense and will be considered as part of the penal code. Some aspects already are, but the measures will tighten significantly,” Rama said.
Albania suffers from major problems with informality. Businesses often sell goods and services without receipts to avoid paying taxes, and many companies either do not pay social insurance for their employees or pay social insurance on salaries that are lower than the real amount employees take home.
While Rama has set the deadline for legal changes for September, the idea to use criminal charges as a deterrence is not new.
“Finding a single employee without the proper social insurance, will be equal to filing criminal charges and sending behind bars the person responsible and the manager of the company,” Rama said in December last year at a social insurance conference. “We can no longer go on like this.”
The changes require 84 votes in parliament to change the penal and labor codes.
Currently Albanian legislation only mandates fines for such violations.
Albania’s government is faced with failure to meet its revenue goals as the economy stagnates and businesses have not responded well to tax increases by as much as 50 percent since the Socialist-led government took over in 2013.
The number of businesses closing up shop is increasing, and the business community has asked that taxes be lowered in addition to fighting informality.
Prime Minister Rama, however, insists that it is the high rate of informality that is to blame and that punitive measures on businesses to end informality are the solution — not lower taxes.
In a press conference last week he said that the government is analyzing the declining revenue and will set up measures based on that analysis.
Local media reported that there was some opposition within Rama’s own coalition and in-house lawyers over shifting administrative infractions into the penal code.
The new measures come at the heels of the government’s campaign to end electricity theft, which saw thousands of Albanians arrested and jailed for having illegal links to the power network.
Tens of business owners were also arrested for using cheaper priced home lines instead of the more expensive business contracts with the state-owned power company.
The latest Finance Ministry data published this week show the government revenue deteriorated in June, when total revenue was up by only 0.9 percent year-on-year and failed to meet the monthly target by 2.17 billion lek (€15.2 million) on lower VAT and excise tax collection, the two key taxes accounting for around half of total government revenue.
For the first half of this year, the government collected about 183 billion lek (€1.28 billion) up 4.4 percent compared to the same period last year, but down 4.5 percent or 9.6 billion lek (€61 million) compared to the target it had set.
