TIRANA, Jan. 8 – Albania’s main opposition Democratic Party has blamed the tough business climate and the high tax burden for the closure of some 15,000 small and medium-sized enterprises in 2018, two-thirds more compared to 2017.
The opposition Democrats blame the aggressiveness of tax inspectors, tax hikes, an increase in electricity and water fees as well as new higher property tax on business facilities for what it calls a critical situation in the country’s economy “where common Albanians are being taken to bankruptcy with high taxes and fines, and millions of euros are being awarded to offshore tax havens with which Prime Minister Rama shares power.”
“The 15,340 businesses that closed down in a year belong to common citizens, small and medium-sized entrepreneurs who have downed shutters because of local government taxes and tariffs that have increased by two to three times, electricity that is 30 percent higher and the water bill that has become 44 percent more expensive,” says Dorjan Teliti, a Democratic Party official for economic affairs.
He cites the DH Albania case, an offshore tax haven with alleged links to one of the country’s most powerful businessman that recently had €30 million in Albanian public contracts cancelled over cheating Albanian authorities with a newly established unit falsely claiming it was part of a major US company with 20 years of experience.
The data that the opposition Democratic Party refers to are reported by the tax authorities as the number of businesses that have switched to passive status, temporarily suspending their activity.
As a rule, businesses switch to the passive register in case of not operating or not submitting tax statements for 12 months or declaring the suspension of commercial operation with the National Business Center for a period of more than 1 year or indefinitely.
The number of businesses officially de-registering with the National Business Center is much lower due to complicated resolving insolvency procedures, which, according to the latest Doing Business report, take 2 years and 10 percent in costs as a percentage of a debtor’s real estate.
The finance ministry claims many of the business closures are fictitious and carried out in a bid to escape tax obligations, and says that more than 11,000 businesses opened in 2018.
Starting next year, businesses will first have to pay all tax obligations before switching to passive status in tighter tax evasion measures approved in the 2019 fiscal package.
Small business owners complain the situation for them is getting tougher each year amid a hike in tax burden, lower purchasing power and tighter competition from bigger shopping centers and supermarket chains constantly gaining market shares.
“The severe situation can be cured by only one pill, the Democratic Party program on the recovery of business and the economy through a considerable cut in taxes such as a 9 percent flat tax, VAT exemption for businesses with an annual turnover of 12 million lek (€96,000), cutting taxes on oil by 30 lek (€0.24)/litre and cancelling every corruptive concession that would free the economy from a handful of oligarchs that rob the Albanians’ wealth at the Prime Minister’s office,” says Democratic Party official Teliti.
Opposition Democratic Party leader Lulzim Basha has earlier warned alleged corruptive public private partnership contracts awarded without race to a dozen local oligarchs road, health, education and waste management infrastructure projects as part of a Euro 1 billion PPP program risk taking the country’s public debt to an unaffordable 80 percent of the GDP if hidden taxpayer obligations are taken into account.
Meanwhile, the ruling Socialists claims a series of tax incentives that have taken effect this year, most importantly a cut in the profit tax for mid-sized businesses to 5 percent and a slash in the dividend tax to 8 percent, will give an impetus to the country’s economy and ease taxes for both businesses and households.
Albania will be heading to local elections on June 30,2019 in what is seen as a key test for the united opposition ahead of the upcoming mid-2021 general elections where the ruling Socialists will be seeking a third consecutive term of office which incumbent parties have never claimed during the past quarter of a century to transition to democracy following the collapse of the communist regime in the early 1990s.
The ruling Socialists currently run the country’s largest municipalities and hold a comfortable majority in Parliament, allowing them to rule alone in a stronger second consecutive mandate compared to when they assumed power in 2013.
