With only 67 votes by the ruling Democrats, a partial tax amnesty approved a couple of years ago has been made effective again, this time until the end of 2013 but yet pardoning the same debts and fines as the 2011 law and still foreseeing prosecution for false statements
TIRANA, June 3 – In a special parliamentary session summoned just ahead of the June 23 elections, Albania’s major parties joined votes to approve the much roumoured three laws required by the European Commission on Albania’s EU bid, but failed to approve a full tax amnesty needing a qualified majority of 3/5 of votes. With only 67 votes by the ruling Democrats, a partial tax amnesty approved a couple of years ago was made effective again, this time until the end of 2013 but yet pardoning the same debts and fines as the 2011 law and still foreseeing prosecution for false statements. The opposition which did not give its consent described the initiative by the ruling Democrats as politically motivated to gain advantage ahead of elections.
Back in 2011, the ruling majority also failed to approve a fiscal amnesty requiring a qualified majority of 84 votes and applied a partial amnesty pardoning debts and fines until the end of 2010 in return for fees ranging from 1 to 50 percent. The opposition, which did not take part in the vote, said the bill was being approved on electoral grounds two weeks before the May 2011 local elections.
Both households and businesses were given the opportunity to legalize undeclared cash at 3 three percent fees. The amnesty which was in force from May 2011 until March 2012 mostly served to individuals who revalued their property under minimum 1 percent fees, while businesses mostly ignored the amnesty fearing verification of their self-declarations by tax inspectors. Under normal conditions, the property revaluation process is made under a 10 percent tax imposed on the difference of the sale and purchase price.
Under the amnesty law, businesses had their tax and customs debts pardoned until December 2008. They had to pay 30 percent of the principal for 2009, and 50 percent of the capital for 2010 to have their fines and penalties forgiven. 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.”
The fiscal amnesty proposal came as a surprise proposal at a time when the business community or the media had not been introduced to any official version.
The amnesty also makes null a law approved recently by the majority to return the revaluation of real estate under a modest 1 percent tax until October 31, extending it for another two months until the end of the year.
Official data show some 3 billion lek was collected from the revaluation of 70,590 properties, worth around 300 billion lek, from April 2011 to August 2012.
Fear of penalties in audits
Finance Minister Ridvan Bode had attributed the failure of the tax amnesty back in 2011 to lack of political consensus as the bill failed to get the opposition’s votes which would turn it into a full amnesty.
However, the key reason was that although on a self-declaration basis, businesses still face the risk of penalties for false declarations during inspections by tax officials.Back in March 2012, few days before the deadline on the fiscal amnesty expired, government warned it would launch a campaign to forcefully collect unpaid tax obligations. Introducing the result of the fiscal amnesty, in force since May 2011, deputy Finance Minister Alfred Rushaj called on businesses to benefit from the last days of the amnesty, warning that the tax administration was prepared to forcefully collect unpaid obligations when the amnesty expires. The forceful collection includes seizure of business assets and goods and their sale in auctions. The regional tax directorates can also freeze the company’s bank accounts.
Rushaj said the spirit of the amnesty is self-declaration, and businesses should be aware of this, acting in time, before the audits start. “When that happens, and the business has not self-declared things properly, and is found to be in evasion, there will be penalties,” Rrushaj had warned.
Accounting experts also justify businesses’ doubts about the advantages of declaring hidden monetary amounts and assets. The Institute of Accounting Experts says that one of the most controversial issues is the fact that the law states that if false self-declaration is identified in the future, businesses will lose their amnesty benefits.The Tirana Chamber of Commerce and Industry shares the same concerns over the amnesty’s guarantees. Nikolin Jaka, the Chamber’s head, says that although on a self-declaration basis, businesses still face the risk of penalties during inspections by tax officials.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,” Kseniya Lvovsky, the World Bank country manager for Albania, said about the previous amnesty.
The amnesty includes
נ legalization of cash under a 3 percent tariff for citizens and small businesses until 31 December 2013
נ reassessment of real estate under a 1 percent tariff for citizens until 31 December 2013
נ pardon of all unpaid taxes for citizens until the end of 2010, including unpaid taxes for cars and traffic fines
נ pardon 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
נ pardon of electricity bills for people in need until the end of 2006
נ pardon of drinking water bills for household consumers in water supply companies which had not been transferred to local government units until the end of 2010
נ pardon of small business taxes until the end of 2010
נ self-employed people will have their social and health insurance fines and penalties forgiven until December 31, 2008
נ small businesses can also have their fines and penalties for their employees forgiven until December 31, 2010
נ small businesses which have installed cash registers until February 28, 2011 will have their fines forgiven
נ 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.
נ 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.
