“What is more important is that by keeping the corporate income tax unchanged, everything we get in income tax from the fa谮 sector is reinvested on employment for you,” said Rama, implying that the corporate income tax will remain unchanged at 15 percent
TIRANA, March 12 – Government has made it clear it will not make an exception on the garment and footwear sector on corporate income tax which starting January 2014 has been raised by 5 percent to 15 percent angering this business community which is one of the top exporters and employers.
In a meeting this week with garment and footwear producers in the town of Kruja, some 30 km from Tirana, Prime Minister Edi Rama said the Albanian government is concluding a package of 42 measures aimed at facilitating the business climate for garment and footwear producers.
The lift of social security and health insurance contributions on new employees for a certain period of time, the lift of VAT on all kind of machinery imports, the removal of customs barriers and abuses during inspections are some the measures government has unveiled for the industry locally known as fa谮.
The Prime Minister said the corporate income tax would remain unchanged at 15 percent, turning down requests for a possible reduction by the business community.
“What is more important is that by keeping the corporate income tax unchanged, everything we get in income tax from the fa谮 sector is reinvested on employment for you,” said Rama.
“We are preparing a full package for the fa谮 industry because we want to make use even of the fact that is a very fast way of investment and brings fast employment. This sector can bring high employment at a time when we interest is increasing even from abroad,” he added.
The Prime Minister also underlined the importance of developing and implementing closed-loop manufacturing systems in the garment and footwear sector which imports raw material and in most cases carries out only partial manufacturing.
Government says the extension of the two existing companies in Kruja is expected to employ another 1,500 people in the next few months.
A special commission composed of representatives of garment and footwear sector and the Mnistry of Economy, Trade and Entrepreneurship will meet periodically until the new package is finalized.
The support package is expected to bring fiscal facilitation, subsidies and easier administrative procedures for the garment and footwear industry.
Producers worried about competitiveness
Worried about negative impacts from the new fiscal package, the fa谮 industry had warned the increase of the corporate tax to 15 percent risked making Albania less competitive compared to other regional countries applying 10 percent flat tax regimes. They had even threatened of transferring their capital abroad, bringing the example of Macedonia which offers special tax incentives for investments in technological-industrial development zones including personal and corporate income tax exemption for the first ten years.
Garment and footwear producers have requested government to freeze the increase in the minimum wage for a period of up to five year, arguing that spending on wages accounts for 80 percent of their operating costs.
Producers also request that the VAT-free list on imports of machinery and equipment is extended and that the corporate income tax on the industry is lifted.
Exports of garment and footwear products, the traditional top Albanian exports until 2011, have overcome the crisis impacts from EU partners despite difficulty in entering new markets.
Meanwhile, exports of garment and footwear products, the traditional top Albanian exports until 2011, overcame the slight shrink in 2012 fuelled by crisis impacts from EU partners despite difficulty in entering new markets. Garment and footwear exports, whose overwhelming majority of more than 80 percent has Italy as its destination, grew by 11 percent to around 70 billion lek (Euro 485 million) in 2013, overcoming the 3.2 percent shrink in 2012.
Garment and footwear exports were Albania’s top exports in January 2014, registering an 18 percent increase.
Overwhelmingly dependant on demand from crisis-hit hit top trade partner Italy, the destination of 50 percent of total Albanian exports and 85 percent of garment and footwear products, the fa谮 industry expects 2014 to be more positive in terms of employment and manufacturing.
Data show some 470 textile companies operate in Albania currently employing 100,000 people. The garment and footwear industry now accounts for 30 percent of total exports, having dropped to the second most important group of exports.
Diversification of markets, considering that the majority 80 percent of these products go to Italy and the remaining share mainly to Germany and Greece is another concern for textile producers.
Some of Albania’s advantages compared to other regional and European countries include the low tax burden, minimum wage and its young population.
