TIRANA, Nov. 3 – While Albania’s three-year conditional deal with the International Monetary Fund is coming to an end, the Fund has warned the Albanian government to be careful with the accumulation of new arrears and revise the current property tax.
Speaking at a joint press conference with Albanian Finance Minister Arben Ahmetaj, Anita Tuladhar, the IMF mission chief to Albania, said the Fund had given its okay to the 2017 draft and fiscal package which makes a lot of tax procedures easier and reduces penalties against businesses in a bid to further improve the business climate after the country climbed 32 steps to rank 58th in the latest Doing Business report by the World Bank.
“In addition to the budget and the fiscal package which we have agreed on, the government has committed on precautions to handle the issue of local government arrears and strengthen the property tax,” Tuladhar said.
Finance ministry data shows the government had accumulated 2.3 billion lek (€16.5 million) in arrears during the first four months of this year from court decisions and public works.
Albania’s local government units were reported to have accumulated about €62 million in arrears equal to 0.6 percent of the country’s GDP in mid-2015 following a territorial reform cutting the number of units to 61 municipalities, according to the IMF.
The appeal comes almost a year after the Albanian government cleared arrears €500 million to the private sector under a two-year program that is estimated to have strengthened private sector balance sheets, reduced nonperforming loans and supported domestic demand, although credit growth still remains at negative growth rates.
The Albanian government has also earlier announced plans to revise the current property tax by the end of 2017 following next year’s expected elections.
The reform is expected to shift property tax calculation from its current rate depending on the size and location of the property to a formula based on current market value by end-2017, in considerably higher rates.
The Albanian government is expected to end its current relations with the IMF conditioned by a three-year Euro €331 million soft loan early next year, when relations with the Fund are expected to shift back to an advisory role.
“There will no longer be a new binding or conditional deal. We would prefer to have an agreement based only on monitoring or advice,” Finance Minister Arben Ahmetaj has recently clarified.
While the Fund has had a decision-making role on the government’s fiscal policies in the past three years, conditioning its financial support at only 3 percent of the country’s GDP with a tougher discipline on public finances, experts and business representatives have often criticized its continuous tax hike policy as not helping improve the business climate in crisis times.
