TIRANA, Oct. 4 – At the peak of a campaign against informality and after fines on tax evasion were sharply increased by up to 50 times, the Albanian government has undertaken new legal action to further tighten measures against tax evasion by replacing some penalties by fines with punishment by imprisonment.
Introducing the new amendments to the Criminal Code, which require a qualified majority of 84 votes in the 140-seat Parliament, Finance Minister Shkelqim Cani said the bill targeted tightening penalties on violations in the customs and tax duties considering that almost half of businesses have operated informally.
“The draft law envisages the tightening of penalties in the fight against informality and smuggling. Penalties with fines are lifted and replaced with criminal offences,” said Cani.
In case of repeated violations or collaboration, the punishment is made tougher between five to 10 years in prison. In case of unregistered businesses, operating without cash registers, not issuing tax receipts or not registering their employees, these are cases of intentional violations and that’s why we will seek imprisonment of up to three years,” said Cani.
The new amendments, approved in principle by majority MPs, were met with strong opposition by the opposition Democratic Party which described them as terror on Albanian businesses and households.
“In fact, in many countries, customs and tax violations are administrative offence, because they are rarely a source of increased risk to citizens, with the exception of medicines and petroleum products. The Finance Minister warned the business community of imprisonment on anything else and not little but 10 years. We are against this kind of aggressiveness and favor lighter alternatives toward households and businesses,” said Eduard Halimi, an opposition Democratic Party MP and former justice minister.
The draft law has also sparked fierce reaction by business representatives who describe the new measures as aggressive and not helping improve the business climate in this time of crisis when businesses are facing poor demand and rising costs due to higher taxes.
The ruling Socialist Party-led coalition has proposed some harsh amendments to the Criminal Code removing fines on smuggling and informality and envisaging only imprisonment of up to ten years for imports, exports and transit of illegal goods.
Under the current Criminal Code, smuggling of excise goods is punishable by fines or imprisonment of up to seven years but if the new amendments are approved perpetrators risk no fines but only up to seven years in prison.
The new amendments are harsher about illegal activity and tax evasion.
“Carrying out illegal commercial activity or conducting commercial activity not registered with tax authorities, failure to declare employees and issue fiscal receipt is a criminal offence and is punishable by up to three years in prison,” says the new article 180/a proposed as an amendment to the Code.
A new amendment also foresees imprisonment of up to five years for the production and sale of fuel not meeting legal quality standards.
The tax administration will also have to be careful as failure to collect taxes within the legal deadlines is made punishable by up to seven years in prison.
With a nationwide campaign to curb informality already underway, the ruling Socialist Party-led majority has recently approved in parliament some changes to the tax procedures law, which increase penalties on tax evasion up to 50-fold. The business community has also expressed concern over the high level of fines which are in huge disproportion to their income or the offence committed.
The new changes envisage fines of up to 10 million lek (€71,000) on big businesses operating in the wholesale trade for not issuing tax receipts, compared to 200,000 lek (€1,411) currently. Fines on small businesses are also envisaged to increase 10-fold from 50,000 lek (€353) to 500,000 lek (€3,529).
Tax inspectors can also sue the taxpayer in case of repeated violation with tax receipts, says an amendment to article 121 of the tax procedures law.
