TIRANA, Oct. 25 – The business community, represented by Konfindustria, is skeptical government’s latest initiative to lower the annual turnover for businesses paying valued added tax for the second time in a row this year will have adverse effects by further increasing tax evasion.
In a statement issued by Gjergj Buxhuku, the administrator of the Association which protects the interests of big production and service industries, Konfindustria warned the proposal to further lower VAT inclusion to 2 million lek of turnover, down from 5 million lek currently, would be inapplicable and lead to tax officials favouring businesses.
According to him, Konfindustria officially demanded the Business Consultative Council in its meeting two weeks ago that the VAT inclusion should be made compulsory for all businesses apart from the so-called street vendors” category, quitting the practice of VAT payment based on annual turnover.
The business association says this year’s VAT decrease to 5 million lek of annual turnover, down from 8 million lek last year created massive tax evasion.
The phenomenon was accompanies with the concerning practice of business self-closure and, forced bankruptcy of many small businesses in order to continue operating as new businesses with no previous tax records.
Currently, around 25,000 businesses with an annual turnover of 5 million lek pay VAT.
Last January, government lowered the VAT threshold to 5 million lek, down from 8 million lek, in an effort to collect more taxes and avoid informality. The move put some thousands of small businesses in the VAT scheme.
The next decrease of the VAT threshold, which government has not announced yet when it will become effective, is expected to put the majority of small businesses in the VAT scheme.
Two weeks ago, the Business Consultative Council, a government advisory body on economic policies, proposed some new changes to the country’s tax system that would see excise tax on tobacco increase, and valued added tax (VAT) on health service and the threshold on VAT inclusion for small businesses lower.
Deputy Economy Minister Alfred Rrushaj has said that under the new proposed changes, the excise tax on tobacco would further increase by 20 lek (20 US cents) per packet, climbing to 70 lek, up from 50 lek currently.
Meanwhile, changes to the VAT applied on the health system are aimed at cutting the medicine supply and health service VAT to 10 percent, down from 20 percent currently.
New cash registers
Government says it will reimburse small business owners for the compulsory installation of cash registers, whose process was delayed until the end of this year following protests by traders over their high prices.
In a hearing at the parliamentary economy committee last week, Finance Minister Ridvan Bode said that under the recently approved draft law, traders can benefit up to 44,000 lek (around 440 dollars) in tax compensation for the tax registers whose final installation deadline has been postponed by next December.
