TIRANA, April 20 – With international oil and base metal prices at a record low, the Albanian government has been suffering a sharp cut in income from the mining royalty, the key tax Albania collects from oil and mining production in the country.
Data from the country’s customs administration shows mining royalty collected from commodity exports dropped to a mere 536 million lek (€3.8 million) in the first quarter of this year, hitting a 5-year low. The first quarter collection rate is 14.4 percent less compared to the same period last year and 70 percent less compared to the first quarter of 2013 when international commodity prices were at a record high.
Mining royalty is currently the key tax the Albanian government collects from oil and mining companies operating in Albania, the majority of which haven’t started paying the 50 percent profit-tax yet because of being stripped of this tax until they recover their investment costs, a legal provision which has often sparked allegations of abuses.
The mining royalty suffered a sharp 43 percent decline in the first 11 months of 2015 when it dropped by 43 percent to 3.6 billion lek (€26 million), according to finance ministry data.
Earlier this year, the Albanian government said it was considering incentives to the country’s key mining industry after representatives of the mining industry appealed for a review of reference prices on chrome and copper, the two key minerals Albania produces and exports, but no concrete action has been taken yet.
Customs authorities say they collected 6.26 billion lek (€44 million) in mining royalties in 2014, down 30 percent compared to 2013, registering the first annual decline after several years of rapid growth.
Royalties, which range from 4 percent for non-metallic minerals, 6 percent on chromium and copper and 10 percent on oil and gas operations rose to a record 8.5 billion lek (€60 million) in 2013, up 20 percent compared to 2012, having grown by more than five time since 2009, when huge investments were made both in the oil and mining sectors.
The sharp decline in international oil and base metal prices has already negatively affected investment, jobs and government revenue from the royalty tax in one of the top exporting industries and is seen as the key threat to Albania’s growth prospects for 2016.
Major oil producing companies have cut production and shifted hands while mining companies are striving to make ends meet, cutting staff and even suspending operations. The slump in commodity prices has also affected Turkish-run Kurum steelmaker which has initiated bankruptcy procedures.
Oil prices have currently recovered to $40 a barrel compared to a 12-year low of $27 last January and around $110 a barrel from 2010 until mid-2014 when they embarked on a downward trend. Meanwhile, metals prices are projected to decline 10 percent in 2016, following last year’s 21 percent drop, due to weaker demand prospects in emerging market economies and new capacity, says the World Bank in its commodity markets outlook report.
