Several amendments proposed by the opposition Socialist Party including the replacement of the current 10 percent flat tax on salaries and corporate tax with a progressive taxation system, and the removal of VAT on chemical fertilizers and medicines were rejected
TIRANA, Dec. 24 – Ruling majority MPs approved last week in a marathon parliamentary session amid strong debates with the opposition a fiscal package which lifts VAT on investments in priority sectors, reduces taxes on coffee importers and tightens measures against informality. Several amendments proposed by the opposition Socialist Party including the replacement of the current 10 percent flat tax on salaries and corporate tax with a progressive taxation system, and the removal of VAT on chemical fertilizers and medicines were rejected by the ruling Democratic Party-led coalition. The opposition Socialists also proposed the removal of 37 lek/litre excise on fuel for farmers and the reduction of VAT on electricity bills for household consumers from 20 percent to 6 percent.
Prime Minister Sali Berisha said the measures were aimed at further improving the climate of doing business, ease the fiscal burden and increase transparency.
Under the changes, the excise tax on unroasted coffee, currently at 30 lek/kg will be lifted, the excise tax on roasted coffee, currently at 140 lek/kg will drop to 60 lek/kg while the customs tariffs on coffee currently at 10 percent will also be lifted. Finance Ministry data show some 4,845 tonnes of coffee were imported during the first eight months of this year, up 14 percent compared to the same period last year. Albania is known for its massive coffee culture with coffee bars being one of the most widespread businesses.
The new fiscal package also foresees an increase by five times on fines to businesses which don’t pay insurance to their workers or in cases of taxpayers not declaring themselves as VAT and profit tax subjects. The fines are expected to increase to 500,000 lek.
Timber exports will also for the first time be imposed a 30 percent tariff on environmental grounds, considering the massive wood cutting phenomenon.
Starting from Jan. 1 2013, procurements on small purchases will also turn into 100 percent electronic. Since January 1, 2009, all public institutions have been issuing procurements only through e-procurement systems, thus eliminating the use of paper-based procurement procedures, and abuses, making Albania the first country in the world to implement a 100% electronic procurement system for all public sector procurements above the threshold of 3,000 Euro.
The new fiscal package also foresees that income from compensation received under final court decisions, and income from state institutions on achievements in science, sports or culture will be excluded from the income tax. Government has also decided that the registration and deregistration of taxpayer representatives will be carried out at the regional tax directorate and not the National Registration Centre where it is currently done.
Meanwhile, the award of scholarships by private universities will be recognized as deductable expenses only if a list on the number and amount of scholarships is initially submitting and approved by the Education Ministry at the beginning of the academic year in order to avoid abuses.
Government had earlier decided to lift the 20 percent VAT on imports of machinery and equipment as well as cement and steel for the construction of hydropower plants.
The 20 percent VAT on imported machinery and equipment will be lifted only for investments of Lek 50 mln (Euro 351,000) or more. However, the garment and footwear industry, the country’s top exporter which this year has been suffering crisis impacts from lower demand by crisis hit EU partners Italy and Greece, will have VAT on machinery imports removed for all kinds of purchases, Prime Minister Berisha has earlier pledged.
The changes were approved in Parliament on December 20 and are expected to enter into force starting from next January.
