The private sector, which in 2013 had some 802,000 employees and contributed to 83 percent of employment, had only a 48 percent share in the personal income tax in 2013 despite its workforce being five times higher.
TIRANA, Aug. 13 – Although accounting for only 17 percent of total employment, the public sector contributes the majority 52 percent in the personal income tax, unveiling the high level of informality in Albania’s private sector which accounts for more than 80 percent of employment and GDP. A study carried out by Open Data research centre shows that the private sector which in 2013 had some 802,000 employees and contributed to 83 percent of employment had only a 48 percent share in the personal income tax in 2013 despite its workforce being five times higher. The situation is a result of the high number of uninsured private sector employees and non-declaration of real wages with tax authorities to avoid paying full social security, health insurance and personal income tax.
The data reconfirm the high level of informality in Albania’s private sector, estimated at more than 30 percent of the GDP.
Personal income tax collection in the private sector dropped by around 12 percent to 8.1 billion lek (Euro 57.5 million) in 2013 mainly as a result of a 6.6 percent decline in tax operators and the lift of PIT for wages from 10,000 lek to 30,000 lek (Euro 70 to 212) in mid-2013, according to Finance Ministry data. Meanwhile, the public sector paid 9.34 billion lek (Euro 66 million) in personal income tax, up 4.1 percent compared to 2012.
The personal income tax accounts for around 10 percent of Albania’s tax income.
The public sector workforce has been on a downward trend in the past decade as major enterprises have already shifted into private hands.
At the end of 2013, the public sector had 163,900 employees compared to 166, 430 in 2009 and 191,000 in 2000 when major enterprises were still state-owned and the public administration was overstaffed.
Meanwhile, the private sector has been continuously growing over the past decade although agriculture accounts for 50 percent of total employment but only 20 percent of the GDP.
The shift to progressive taxation which starting this year which raised corporate income tax for medium-sized and big enterprises by 5 percent to 15 percent has been positively reflected with income from this tax increasing by around 32 percent in the first half of this year.. The opposite has happened with the personal income tax whose progressive application has cut income by 6.5 percent due to lower than the previous 10 percent flat tax applied for low and mid-wages.
