Under the approved bill, citizens and businesses are offered to take advantage of the tax pardon to declare their unpaid taxes and hidden assets before harsher rules are imposed
TIRANA, April 25 – The partial fiscal amnesty government approved last week will start being implemented on a self-declaration basis in the first two weeks of May lasting until the end of 2011. The announcement came by Finance Minister Ridvan Bode one day after majority members of Parliament approved on their own 74 votes the much roumored bill pardoning tax and customs obligations for citizens and businesses for the past 20 years. However, unable to receive the opposition’s consent, the bill failed to turn into a full amnesty law, whose approval required a qualified majority of 2/3, or 84 votes.
“If the opposition gave its consensus, the law would also include the amnesty for criminal offences mainly related to taxes as well as a number of cases which are being tried by prosecution or justice system on tax evasion, classified as criminal offences,” said Minister Bode in a press conference last weekend.
The opposition, which did not take part in the vote, said the bill was being approved on electoral profit grounds two weeks before the May 8 local elections.
The bill pardons unpaid tax obligations for individuals and small businesses until 31 December 2010. Big businesses can have their customs and tax obligations pardoned until 31 December 2008.
Under the approved bill, citizens and businesses are offered to take advantage of the tax pardon to declare their unpaid taxes and hidden assets before harsher rules are imposed. Only businesses connected to current and former public office holders and those whose origin of capital is not legal business, i.e criminal activities and trafficking, are excluded from the law on the “legalization of capital and the pardon of part of tax and customs debts.”
Finance Minister Ridvan Bode said the first amnesty in 20 years aimed to close the chapter of transition to a market economy, which had not been transparent and suffered from chronic lack of fiscal discipline and controls.
Listing the taxes and assets the government plans to legalize against a small fee, Bode said the lack of support in parliament from the opposition Socialist Party meant the bill could not include taxes, assets and capital currently being reviewed in court cases or investigated by prosecutors.
“However, the law covers not only a wide range of subjects but also a large area of business,” Bode told reporters. “It provides solid guarantees for those citizens and businesses that have not declared or paid taxes to declare them and legalize those capitals.”
Those who have evaded taxes, failed to declare their capital and assets have now the possibility of registering them after they pay a fee, mostly of 3 percent. Businesses can also pay up to 50 percent for specific types of assets or unpaid customs taxes.
Ahead of local government elections on May 8, the government also forgave those who had not paid their vehicle registration taxes and power bills before the power company was privatized.
Bode did not say how much he expected the amnesty would bring to the state budget, but added it would mainly help to relax citizens and businesses who were not comfortable with their tax history.
Businesses estimated around 40 billion lek (285 million euros, 400 million U.S. dollars) would be pardoned. The minister said he would rather wait for the effects of the amnesty. State officials whose wealth is regularly checked by anti- corruption bodies and wealth created as a result of criminal or mafia-related activities will not be pardoned, Bode said, echoing comments by Prime Minister Sali Berisha.
Asked about the possibility of other amnesties, Bode said he did not believe there would be a possibility for frequent amnesties.
The World Bank suggests that the process should be transparent, credible and done independently. “It is also important that the amnesty is done in such a way that it minimizes moral hazard. Moral hazard is a notion that you can disobey the law, not pay taxes, not be punished and get away with it. It can be managed. For avoiding this, it is important that new cases of behavior which have been amnestied are made impossible through a combination of enforcement, punitive measures and incentives encouraging responsible financial behavior of individuals and companies,” says Kseniya Lvovsky, the World Bank country manager for Albania.
The law covers:
– legalization of monetary amounts under a 3 percent tariff for citizens and small businesses until 31 December 2010
– reassessment of real estate under a 1 percent tariff for citizens
– forgiveness of all unpaid taxes for citizens until the end of 2010, including unpaid taxes for cars and traffic fines
– forgiveness of customs duties for imported cars until the end of 2010, along with fines and interest rates, if 50 percent of the customs principal is paid
– forgiveness of electricity bills for people in need until the end of 2006
– drinking water bills for household consumers until the transfer of shares to local government units, but no later than the end of 2010
– small business taxes until the end of 2010 will be forgiven
– self-employed people will have their social and health insurance, fines and penalties forgiven until December 31, 2008
– small businesses can also have their fines and penalties for their employees forgiven until December 31, 2010
– small businesses which have installed cash registers until February 28, 2011 will have their fines forgiven
– all companies possessing real estate and machinery below their market value in their balance sheets can reassess them at 3 percent and 5 percent tariffs, respectively.
– businesses will have their tax and customs debts forgiven until December 2008. If they pay 30 percent of the principal for 2009, they have their fines and penalties pardoned. If they pay 50 percent of the capital for 2010, they have their fines and penalties forgiven.
