TIRANA, May 21 – Government has withdrawn from the initial version of a draft law making it compulsory for businesses to pre-pay profit tax quarterly after fierce opposition related to increase of costs. In the latest meeting of the Business Consultative Council, deputy Finance Minister Alfred Rrushaj assured that companies can also pay the tax at the end of each quarter. He said that government’s goal was to facilitate procedures, cutting the number of profit tax payments to only five from 13 currently and not to increase their costs.
“Our goal is that the tax is paid once every three months and this could be in March for the January, February, March period. We are very flexible in this direction. But every taxpayer that would like to prepay in monthly installments under current procedures can continue doing so at the tax administration,” said deputy minister Rrushaj.
The garment and footwear industry, Albania’s top exporting industry described the payment in advance as unacceptable. “The character of our business cannot afford the prepayment of the profit tax every quarter. We are 100% exporting businesses and conduct trade with Italy and Greece whose situation is already known now. Delays in payments are evident and normal now and that’s why we request paying quarterly but at the end of the each third month,” said industry representatives.
The business community had strongly opposed the initial version of the draft law expected to enter into force in Jan. 2013 claiming they will face extra costs in these times of crisis.
Meanwhile, the Finance Ministry argued the draft would reduce profit tax payments from 13 in a year to only 5. “The main reason of this draft law is related to the improvement of Albania’s indicators in the annual World Bank ‘Doing Business’ reports. Under the current income tax law, businesses make 13 payments on profit tax, 12 of which are prepayments in installments and one is related to the annual declaration.
Poor performance in the profit tax collection is another reason government has proposed the new scheme. Latest Finance Ministry data show businesses are facing tough times in early 2012 after profit tax registered a sharp 21.8 percent shrink at the end of the first quarter.
Albania has been implementing the 10 percent flat tax on salaries and corporate taxes since 2008 in an effort to improve business climate and attract more foreign direct investment.
However, data show the implementation of this tax has had minor impacts on tax revenues during the past few years since government revenues from this tax have increased by only 8 percent in the 2008-2011 period.
The opposition Socialist Party which has proposed a progressive taxation system to replace the 10 percent flat tax in an effort to lower tax burden for people with low income. Meanwhile, the IMF has recommended raising the flat tax to 15 percent if Albania wants to keep public debt, currently hovering at around 60 percent of the GDP, in check.
Excise collection
Starting from next July, the customs administration will be the only institution collecting excise tariffs, according to a draft law approved by majority MPs at the parliamentary economy committee.
The draft law will strip the tax administration of collecting excise on cigarettes and alcoholic beverages and domestically produced fuel by the ARMO refinery in an effort to improve excise collection, the second most important tax after VAT.
Finance Ministry data show that although the excise rates have been raised for several products such as tobacco and some oil products, excise revenue in 2011 rose by only 4 percent to 40 billion lek accounting for 13.3 percent of total tax revenue.
The new draft law will also be accompanied with some changes to excise rates for alcoholic beverages and tobacco. The draft law foresees the excise tariffs for beer with an alcoholic percentage with 6 percent and above will be raised by 20 percent.
In an open letter, the country’s biggest beer producers opposed the changes saying that the new changes to the excise rates and the guarantee component foreseeing pre-payment of excise for raw material, products under production and finished ones would damage their activity.
The excise collection for tobacco remains unchanged at 70 lek for 20-cigarrete packets but will be collected at 3,500 lek per 1000 cigarettes in order to prevent tax evasion for 10-and 25 cigarette packets. The draft law also obliges home producers to declare their distilling equipment used for raki and wine production foreseeing fines of up to 200,000 lek.
