TIRANA TIMES
TIRANA, Dec. 20 – The majority approved in last week’s parliamentary session a fiscal package imposing for the first time a 10-percent value added tax (VAT) on medicines, which are already up to 60 percent higher compared to EU countries. The change, approved amid debates received only 71 votes of the Democratic-Party led ruling coalition, while the opposition refused voting the law which it considered a sign of budget crisis and government corruption, affecting people in need.
However, Finance Minister Ridvan Bode said the taxation of medicines would prevent abusive prices in the sale of medicines, warning of investigations. He said medicines were the only duty-free products which cost 25-60 percent more than in EU countries at a time when other products which are taxed are at least 40 percent cheaper than in EU countries.
According to Bode, the measure will benefit consumers providing bigger reimbursement, and lower what are considered as very high profits by pharmaceutical companies operating in Albania.
Insurance, profit tax
Other changes approved under the package were also the recognition of workers’ life and health insurance as deductible expenses for business owners, a measure which government described a big favour to businesses, employees and insurance companies.
The majority also removed the current 25 percent profit taxes on Albanian companies operating abroad and wanting to bring their capital back home, making it a zero tax.
“Another novelty of this draft law is the fact that an important attempt is made to repatriate foreign capital outside Albania,” said the economy ministry earlier, adding that Albanian companies, shareholders in foreign companies, will not be taxed for the dividend they receive if previously taxed in the country where they operate.
“We had this only for resident companies but we extended it also to non-resident companied in order to attract capital outside Albania,” ministry officials said.
The new changes also foresee the extension of the deadline to use privatization bonds until the end of 2011.
Bank provisions
Government also approved legal changes to control the soundness of the banking system, adopting international accounting standards to control loan provisions, which Finance Minister Ridvan Bode said were twice tighter compared to the current Bank of Albania regulations. According to him, this measure will make bank directors and owners more cautious and responsible when giving loans forcing them to demand higher collateral and eliminate recognition of deductible expenses for provisions above international standards. The measure, expected to further tighten lending standards came after bad loans hit a record 13.5 percent at the end of September 2010.
Central bank data show problematic or non-performing loans climbed to a record 13.5 percent of the total portfolio at the end of the third quarter of this year, up from 9.82 percent during the same quarter in 2009 and 12 percent at the end of the second quarter of 2010.
Provision for bad loans also climbed to 8.16 percent at the end of September 2010, up from 7.31 percent last June and 6 percent in September 2009.
Tobacco excise up
Starting from next January cigarette prices in Albania will increase by 20 lek (20 USD cents) per packet in a measure aimed at discouraging the country’s high smoking rate which will bring government an extra 28 million dollars for 2011. Under the changes approved by majority members of Parliament, the excise tax on tobacco will further increase by 20 lek (20 US cents) per packet, climbing to 70 lek, up from 50 lek currently.
Opposition MPs have accused government of intentionally not including the extra revenues from the increased tobacco excise tax in the 2011 budget, suspicious that the amount government will in fact collect is twice bigger than projections.
The draft law has been compiled in cooperation with the Health Ministry and is intended to bring tobacco excise taxes in line with regional and EU countries, considering that currently, a packet of cigarettes in Albania is quite cheaper than in EU countries.
The tobacco industry has told government that there are pitfalls that can come from a drastic price increase, creating a lose-lose situation for all – the companies, the government and the customers.
