TIRANA, Nov.1 – Changing the flat tax into a progressive tax, lowering the public debt levels, reforming the health and pension systems are key priorities in the electoral programme which the opposition Socialist Party will introduce this weekend in its party congress as a platform ahead of the 2013 general elections. In an interview with daily Panorama this week, former Socialist MP Ilir Beqja, a member of the SP National Assembly, says reforms will start with the abolition of the 10 percent flat tax and the introduction of a progressive tax to lower the fiscal burden for the majority of the poor population in order to achieve “social justice without infringing sustainable development.”
“During the six years of Sali Berisha’s governance, the households’ fiscal burden has increased. The impact of consumption taxes (VAT and excise tax) has increased from 45 lek out of 100 lek of taxes in 2005 to 52 lek currently,” he added.
“The fiscal system will completely changeנshifting from a regressive taxation system of consumption and proportional income into progressive taxation which will raise the fiscal burden for the wealthy,” says Beqja.
Speaking of the country’s public debt levels, currently close to the legal ceiling of 60 percent of the GDP, Beqja described it as very high when compared to Albania’s current stage of development.
According to him, if the 100 million dollar debt which the government owes to construction companies and the 950 million dollars in non-performing loans is added, the public debt would climb to 80 percent of the GDP.
The former opposition MP who was stripped of his mandate earlier this year, says Albania is spending 600 million dollars on public debt service, twice more than in 2005 and around 4 percent of the GDP, representing a higher expenditure compared to education, health or agriculture.
The Socialist Party’s programme also foresees medical service at affordable tariffs even for uninsured persons and increased social protection for elderly people who do not benefit from pensions because of not having paid social security contributions.
The opposition Socialist Party has recently submitted a draft law on some changes to the VAT foresees the removal of 20 percent VAT for wheat, flour, bread, milk and its reduction to 10 percent for cooking oil, sugar and rice starting from January 2012. However, the initiative has been opposed by the ruling majority which has described the opposition’s proposals on VAT as populist and damaging to Albanian agricultural producers.
Berisha: Opposition’s proposals Marxist
Reacting on Wednesday to the opposition’s economic reform platform Prime Minister Sali Berisha described it as a Marxist fiscal system whose failure had been proved.
Guaranteeing investors no changes to the flat tax system, Berisha pledged other reforms to boost economic freedom for entrepreneurs as the safest way in these difficult times.
“I guarantee that the Marxist tax will never return to this country. Those who think of making this country more prosperous by ruining and fighting the rich, blocking privatizations, concessions and the public-private partnership unveil the alternative of their predecessors,” said Berisha, hinting at the communist past of the opposition Socialist Party.
Govt withdrew from flat tax change
The new fiscal package which the government approved last July did not include changes to the 10 percent flat tax and its replacement with a progressive tax. The government withdrew its approval last month after fierce opposition by the business community. The draft envisaged raising profit taxes for big companies up to 30 percent, changing the 10 percent flat tax system it has applied since 2008 into a progressive profit tax. Facing lower revenues, Finance Ministry sources wanted the 10 percent profit tax to remain in force only for companies with a profit rate of up to 20 percent. The profit tax for companies with profit rates from 20 to 30 percent was expected to increase to 20 percent, while companies with a profit rate of more than 30 percent would be taxed at 30 percent. A study by the Finance Ministry shows that 15 out of 100 large companies operating in Albania apply profit rates of more than 20 percent. Data show 6 of the surveyed companies had profit rates from 20 to 30 percent while 9 others applied profit rates of more than 30 percent.
