TIRANA, Nov. 24 – Government revenue failed to recover even last October despite an ongoing nationwide campaign against informality and a mid-year budget cut having revised targets downward.
The finance ministry says government revenue in the first 10 months of this year failed to meet the target by 10.9 billion lek (€78.5 mln), in a similar situation compared to last September when a warned aggressive nationwide campaign formalized thousands of business but closed down thousands of others not affording to pay taxes.
The October performance also proved a failure with income down by 2.8 percent compared to a year ago and failing to meet the target by 12.5 percent despite thousands of businesses previously operating informally registering with tax authorities. The poor performance was affected by a sharp 35 percent decline in excise tax on lower imports of fuel and tobacco. The situation has led to massive dismissals and suspensions in regional customs directorates.
Taxes collected by local government units on small businesses doubled to 74 million lek (€530,000) last October while social security contributions were up by 9 percent to about 6 billion lek (€42.6 mln), registering the only positive indicators from the aggressive campaign against informality since last September which is having adverse effects on the budget revenue during its start.
Facing underperforming revenue and a possible new year-end budget cut, the government was forced to cut spending and public investments and keep the budget deficit significantly below the target.
The nationwide campaign against informality which has formalized more than 20,000 businesses since its launch last September, but closed down thousands of others, has been criticized by business representatives as being too aggressive and mainly targeting small businesses, which account for the overwhelming majority of 90 percent of total enterprises in Albania, but whose weight in the total budget revenue is relatively small. New legal changes increasing fines on tax evasion by several times and legal action to make tax evasion punishable by prison by amending the Criminal Code has also been criticized by the business community as not helping improve the business climate.
Experts have warned the campaign will further affect domestic consumption, the key driver of the Albanian economy, and spark a price hike in the short-run despite positive effects in the mid-and long-term.
