TIRANA, Sept. 24 – With a nationwide campaign to curb informality already underway, the ruling Socialist Party-led majority has approved in parliament some changes to the tax procedures law which increase penalties on tax evasion up to 50-fold, sparking strong debate with the opposition describing them as repressive and punitive. Some members of the governing coalition and the business community have also expressed concern over the high level of fines.
The new changes approved in accelerated procedures this week 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.
The ruling majority approved the law with 75 votes to 19 amending only one article from the original draft law which allowed customers not to pay in case they are not provided with a tax receipt in a similar but lighter form. The article, initially turned down by the parliamentary economy committee, was reformulated under a new amendment proposed by three Socialist Party MPs, including Erion Braà§e, the head of the parliamentary committee, as customers are allowed not to carry out the transaction if they are not provided the tax receipt.
The original draft law envisaged what Prime Minister Edi Rama has often quoted that “buyers have the right of not paying for goods and services they are provided in case traders don’t issue a fiscal receipt.”
The new law also leaves times to businesses to register their goods without VAT receipts until the end of December 2015 through self-declaration so that they can escape seizure during inspections.
Speaking in Parliament on Wednesday, Prime Minister Edi Rama described the tougher penalties on tax evasion as a package that will create the opportunity for lower taxes and wage increase.
“This is a package of support for every citizen and household, every company which abide by the laws in this country and pay the obligations and who will tomorrow have the right to ask for tax cuts and have the opportunity for wage increase,” said Rama.
Opposition Democratic Party MP Jorida Tabaku described the new law as an effort to cover the budget gap caused by “inability to draft competitive fiscal and economic policies.”
“The truth is that the biggest tax abuses in this country are not caused by those 36,000 small businesses which account for 5 to 10 percent of revenue in the state budget. The real problem is the big dealers of the economy bringing fuel and tobacco and who have to pay excise taxes,” said Tabaku.
Earlier this week at the parliamentary economy committee, Finance Minister Shkelqim Cani described the measures as necessary to support the nationwide campaign against informality that the Albanian government has launched.
Opposition Democratic Party MP, Ridvan Bode described the proposed measures as repressive toward the business community and coming at a time when government has failed to meet its revenue targets.
“The whole of this proposed package only deals with the increased repression and punitive measures on households and businesses. There is a clear relation with barriers set on market entry,” said Bode, a former finance minister.
The penalties were also opposed by some MPs of the Socialist Movement for Integration, the ruling Socialists major coalition partner.
“I think the tendency to increase fines will not bring any improvement to the Albanian economy but will ruin business,” said Gjovalin Kadeli, a SMI MP.
The amendment allowing customers not to pay if they are not provided tax receipts, also sparked fierce debates.
In the new law, the Albanian government has also decided that big businesses operating in the wholesale trade will be banned to engage in retail sale starting April 2016.
Penalties on uninsured workers have been unified to 500,000 lek (€3,528) for both SMEs and big businesses. Reporting lower than the real wage has also been made punishable with 500,000 lek.
The Albanian government has also proposed some harsh amendments to the Criminal Code removing fines on smuggling and informality, removing fines and envisaging only imprisonment of up to ten years for imports, exports and transit of illegal goods.
The changes, which have been proposed under a draft law approved by government and require a qualified majority of 84 votes in the 140-seat Parliament, come at a time when the Socialist Party-led coalition has launched a nationwide campaign against informality.
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.
“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.
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.
