“We are aware that we could have 6 billion lek (Euro 42 mln) less in revenue this year, but we have a plan B that will examine expenses or a budget review next June or September,” said a deputy finance minister
TIRANA, April 30 – Government has warned the poor performance of public finances in early 2015 could force it to revise its overoptimistic budget downward later this year.
Irena Beqiraj, a deputy Finance Minister and acting customs director general, said customs income had underperformed in the first quarter of this year on lower royalty collected from oil production, lower imports of fuel and tobacco and a rising number of VAT-free imports of machinery and equipment.
“We are aware that we could have 6 billion lek (Euro 42 mln) less in revenue this year, but we have a plan B that will examine expenses or a budget review next June or September,” said Beqiraj.
Albania’s public finances slightly recovered in the first quarter of this year when government revenue rose by 3.6 percent to 86.6 billion lek (€606 mln) fuelled by a rise in non-tax revenue which include fines and transfers of income by state institutions, but yet failed to meet the target by around 3 percent.
A report published by the Finance Ministry shows that while tax revenue suffered in early 2015 with the key value added tax down by 9 percent, the performance was compensated by non-tax revenue which were up by around 64 percent probably driven by the transfer of some Euro 23.5 million from the sale of three 4G licences to mobile operators by the country’s electronic communications authority.
The value added tax, which is levied at a fixed 20 percent rate on almost every product and service and accounts for more than one-third of total government revenue slightly dropped by 9 percent in the first quarter of this year, hinting sluggish domestic consumption which is the key driver of Albania’s growth.
However, excise taxes and the profit tax strongly recovered registering growth rates of 15.5 percent and 37.6 percent respectively.
The Albanian government continues applying a tight fiscal policy with both total government spending and public investments failing to meet targets set for the first quarter of this year.
Government spent around 90.5 billion lek (€633 million) in the first quarter of this year, some 10.5 percent less compared to its target while public investments rose by 12 percent to 8.2 billion lek (€57.5 million), yet remaining around 20 percent compared to the target set for this year.
At 8.2 billion lek, the amount spent on public investments was slightly lower compared to around 9 billion lek (€62.2 mln) it paid on interest rates on public debt which stands at a record of around 70 percent of the GDP.
The Albanian government also paid around 7.4 billion lek (€52 mln) in accumulated unpaid bills to the business community as part of its three-year program initiated in 2014 which targets clearing around Euro 500 million in arrears.
In a bid to bring the economy back to sustainable growth, the Socialist Party-led left wing majority has approved a rather overoptimistic budget for 2015 expecting an 11 percent increase in revenue, a 3 percent GDP growth and a slight reduction of public debt already hovering at 72 percent of the GDP.
While key taxes such as the personal and corporate income taxes will remain unchanged, defying businesses calls for a return to the flat tax regime after the corporate income tax was raised by 5 percent to 15 percent in 2014, the fiscal burden has further increase by raising the withholding tax on dividends and rents and capital gains, increasing the circulation tax on fuel and imposing higher excise rates on tobacco.
