TIRANA, May.1- The International Monetary Fund has described the decision to implement an Albanian flat tax as not only unnecessary but hasty, and said the existing tax system is adequate for the Albanian economy. Albanian mission head, Istvan Szekely, has called only for modification in the labor tax. Szekeley held a meeting with President Moisiu in order to discuss the controversial fines attached to the flat tax law. Szekely explained that the state budget cannot afford lower revenues at this point, hence the tax change is uncalled for. He said that the labor taxes, such as social security contributions, should be lowered. The proposed flat tax does not address this problem. Additionally, the IMF expressed its strong interest in prioritizing the energy problem and said that the financial situation of KESH is now the main problem that should be addressed. The IMF intends to provide the corporation with assistance in order to assist business in general. Szekely refused to comment about the fines law as it is still in the process of discussion. Minister Ruli commented that the energy sector will have to rely on significant imports for the time being.
Berisha reacts
Prime Minister Berisha called that implementation of the flat tax rate a fiscal revolution in Albania. He denied that the IMF had been against the flat tax. In his statement he said that the flat tax rate will boost the foreign investments and will help the Albanian economy. Responding to the allegations that the tax will hurt the society sectors in need, Berisha added that the government will address these implications with additional measures to soften the negative effect.
Opposition leaders meet with IMF head
The director of the IMF mission in Albania, Istvan Szekely met also with opposition leaders Edi Rama (SP) and Ilir Meta (SMI) to discuss the present economic situation of Albania and the main challenges facing the market. The politicians expressed their concern about the country’s economic problems stressing the energetic crisis and the human resources management by the current administration. All sides praised the necessity of the dialogue between decision making authorities and international financial institutions.
Business context
There is an ongoing tension between the government which is undertaking several measures that apply to the economic sector and business which is opposing them, including the controversial fines law, the law on digital and numeric transmissions and recently the changes in the tax system. The government is justifying these changes with its fight against informal economy estimated to be around half of the GDP and with the intent to boos t foreign investment. Albania has a very low FDI figure of 0.5 percent; 6 times lower than the average of the region.
