TIRANA, May 16 – The number of high income earners for the Albanian standard rose to 7,500 in 2016, registering an annual 18 percent increase and a record high since 2011 when individuals with annual income of more than 2 million lek (about €14,700) were first required to submit declarations with tax authorities.
Although constantly increasing during the past six years, the number of high income earners represents only a modest 1.2 percent of total workers in the public sector and private non-agricultural sector, unveiling the high levels of informality in the Albanian economy, estimated at about 30 percent of the GDP.
The hike comes after the Albanian government undertook a nationwide campaign against informality that formalized thousands of businesses previously operating informally and lifted thousands of workers out of informality in late 2015.
The shift to a progressive taxation in 2014 when Albania abandoned its 10 percent flat tax to apply progressive taxation of 13 to 23 percent for high income earners has also had an impact.
Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in the country one of the region’s highest.
The declaration of income applies to both Albania residents and non-residents with income source in the country and abroad that have annual wage and non-wage income of 2 million lek (€14,7000).
Individuals with annual income of not more than 1 million lek (€7,700) can also submit declarations to benefit tax deductible expenses in student loans and cover part of health spending.
Last month, the Albanian government increased the minimum wage by 2,000 lek (€14.7) to 24,000 lek (€176), slightly increasing costs for businesses relying on cheap labor costs and social security contributions for self-employed people, but yet continuing to apply one of the region’s lowest minimum wage.
Private sector workers are commonly declared with tax authorities as receiving minimum wages to avoid paying taxes and get the rest in ‘envelope wages.’
More than two decades after the collapse of the country’s communist regime and its centrally planned economy, Albania has more than 2,000 millionaires but yet has no billionaire, according to a study published by the Tirana-based Foundation for Economic Freedom covering the 2013-2014 period.
The study showed Albania has 2,005 millionaires who possess between Euro 1 to 5 million known as the “millionaires next door,” 19 middle-millionaires with wealth between 5 to 30 million euros, 6 ultra-high-net-worth individuals with 30 to 99 million euros and one centa millionaire with 100 to 999 million euros.
