TIRANA, Oct. 31 – An Albanian-Croatian joint venture has claimed a €15 million tender to upgrade Albania’s billing management and inspection system in an update which the government says will help fight tax evasion and increase tax revenue but the opposition alleges will increase costs for businesses because of what it calls a ‘tailor-made and corruptive tender.’
Albania’s Jehona Software and Datech companies teamed up with Croatia’s Neos to bid €14.85 million, almost the same to the price tag that the Albanian government had set for a Sept. 21 tender with little rivalry, beating a sole Albanian rival with a slightly higher bid.
The joint venture is expected to upgrade the current billing system by providing real time information on business to consumer and business to business transactions in costs that will be handled by the state budget for the next five years until 2022.
Authorities say the final goal of this project that sets up a supervisory system on fiscal equipment for cash and non-cash operations and also traces taxpayers’ wealth is to reduce tax evasion and increase tax revenue.
Once the contract is signed, the joint venture will have to make the new e-system operational in two years nationwide and provide maintenance for another couple of years, says Albania’s National Agency for Information Society which organized the tender.
Tax authorities say business owners will not have to purchase new cash registers and that they will have their current cash registers upgraded at no cost, but business owners fear their maintenance costs could sharply increase and some experts have warned the real time system could make it compulsory even for small businesses to have internet access and a computer in order to transmit tax receipt information in real time.
The current cash register system was made compulsory in 2010 and transmits information manually at the end of a business day, but tax authorities complain the system does not identify tax receipts in real time and only manages to transmit the real turnover and the number of receipts printed by each cash register every day.
The Albanian economy is highly cash-based and tax evasion is estimated at about 30 percent of the country’s GDP.
Back in 2015, Albania spent about €16 million on a system enabling e-communication and e-filing between the business community and tax administration.
More than 140,000 cash registers are currently operational throughout Albania while only a small number of small businesses such as street vendors, local government-run markets, self-employed professionals and farmers are excluded from the obligation.
Cash registers, made compulsory to trace business turnover and VAT, currently cost between €300 to €500 while annual maintenance costs are estimated at €70 per unit.
VAT, which is levied at a fixed 20 percent rate on almost all products and services, accounts for about a third of total tax revenue, but only about 1 percent of it is collected from small business transactions. More than 10,000 small businesses were included in the VAT system last April after the government lowered the annual turnover threshold, triggering protests by businesses over an unaffordable hike in the tax burden.
The Albanian government is offering a series of tax incentives for next year when Albania holds local elections amid a double-digit hike in business closures this year in a situation apparently triggered by an increase in the tax burden for small businesses and rising competition from shopping centers and supermarket chains.
Albania has one of the region’s highest tax burden, but collects only about 27 percent of its GDP in tax and non-tax revenue, the second lowest amount among six EU aspirant Western Balkans countries.
The data indicates widespread informality in the Albanian economy amid a hike in taxes and the inefficiency of the country’s tax administration.
Opposition concerned
The main opposition Democratic Party said its warning five weeks ago that a Croatian company will claim the billing inspection monopoly through a corruptive and tailor-made tender had come true.
Democratic Party MPs says the new e-system will have extra costs of €80 million to €100 million for businesses.
“The corruptive monopoly of Prime Minister Edi Rama makes useless 140,000 current cash registers and forces businesses to pay at least €600 to €1,000 on a new system that the Croatians linked to Edi Rama will ask for,” Democratic Party MPs said at a news conference this week.
“The corruptive tender with a pre-determined winner is a continuation of a scandal discovered 3 years ago by the opposition that forced Prime Minister Rama to temporarily give up awarding a concession on VAT monitoring and collection to an offshore Chinese company linked to his brother, Olsi Rama,” says Jorida Tabaku, a Democratic Party MP who is the deputy head of the parliamentary economy committee.
The main opposition Democrats say their proposed anti-mafia package will put an end once they assume power to what it calls corruptive concessions, tenders, permits by seizing assets and making them available to improve access to education, healthcare, road infrastructure and create new jobs.
