TIRANA, Apr. 23- Albania is profiting on foreign direct investments from Italian businesses as our neighbouring country has approached new measures to stop fiscal evasion through an electronic invoicing. Since Albania has lower labor costs, lower taxes and allows a double tax avoidance agreement.
On January this year Italy started implementing a law on electronic invoicing for private enterprises. E-invoices must be issued in a prescribed format xml (eXtensive Markup Language), digitally signed to guarantee authenticity of origin and the integrity of the content and be sent to the Exchange System (SDI) by the taxpayer directly or through designated intermediaries. Using SDI, the Tax Agency is able to acquire real time data and information concerning all transactions effected by each taxpayer, which may be used for cross-checks and audit purposes. This tool will simplify business transactions and reduce compliance when settled, and therefore impact on the day-to-day running and organisation of companies.
This new invoicing aims to reduce the chances of tax evasion from companies which operate and are established in Italy, and thus increasing indirectly the fiscal burden. The Tax Agency in Italy reports that thanks to electronic billing it has caught fictitious purchases worth 3.2 billion euros just in the first two months of this year, revealing a tax evasion of 668 million euros in VAT.
So after experiencing a little decrease in investments from Italian business people and enterprises, it seems that the e-invoicing has been pushing them to come and invest in Albania. They are mainly focused in the apparel industry on textile and footwear, and also in call centers. As already mentioned, this way of revenue transferring to Albania comes due to lower taxes and the double tax avoidance agreement.
But this phenomenon has started happening in the past four to five months, as administrator to Kler clothing company Flamur Hoxha has said. Hoxha said that apart from the e-invoicing regulations, there are other factors that have impacted Italian businesses to turn to Albania, such as the strain on businesses operating in EU countries such as Italy, Romania and Bulgaria. In Romania and Bulgaria, the operating costs of the apparel companies have gone as much as 70-80 percent of the operating costs in Italy, which makes it inconvenient for businesses to continue their activity in those countries, even though they have invested in high sums for raising mills with large production capacities. Another factor that Hoxha added is the massive abandonment of Romania and Bulgaria. As these are EU countries with a cheap labor movement, it has become almost impossible to secure the labor force in these two countries.
Italian businesses that are moving to Albania in the apparel industry are settling in the peripheral areas of Tirana and it is predicted that until next year there will be a number of 200 employees for one company. However, Hoxha said that relevant to this it would be better if these new ventures were located in the small towns of Albania, as workforce is getting harder to find even in the outskirts of Tirana and Durres. According to data from the Albanian Institute of Statistics (INSTAT), at the end of 2017 there were about 6,300 foreign companies in Albania. f
Foreign and joint ventures from Italy and Greece occupied 54.0 percent of the foreign companies and 58.7 percent of employees during 2017. Enterprises from these countries realized 59.5 percent of exports and 50.8 percent of imports from total commercial tradings of foreign enterprises.
Albania is attractive to foreign investors due to low labor costs and as the country also has the lowest minimum wage in the region and EU. The estimated minimum wage in Albania is 211 euros as of January 2019. After Albania comes Northern Macedonia with 240 euros as minimum wage. When comparing to ten years ago when Albania had a minimum wage of 137 euros, Albanians were making more than Bulgarians who had a minimum wage of 123 euros, and were close to Romanians with 149 euros minimum wage. However, over the past ten years the minimum wages in these countries have significantly increased. (Bulgaria has a minimum wage of 286 euros, and Romania 446 euros). Thus the minimum wage in Albania remains the main attraction, as the apparel and footwear sectors (working in active manufacturing) together with the call center ventures have a primary cost the labor force.
