Latest INSTAT data show imports of “machinery, equipment and spare parts,” an indicator indirectly measuring business investments dropped by 8.3 percent to 81 billion lek (Euro 565 million) in the first eleven months of 2013 compared to the same period in 2012
TIRANA, Jan. 15 – Albania’s private sector continued facing a critical situation as indirectly shown by the profit tax and imports of machinery and equipment, two indicators measuring profits and investments. In addition, lending standing at negative growth rates of 2.2 percent and non-performing loans for some key sectors such as construction, the processing industry and trade at 40 to 50 percent further complete the grim picture of the Albania’s private sector which accounts for 80 percent of the GDP and provides the overwhelming majority of employment.
Latest INSTAT data show imports of “machinery, equipment and spare parts,” an indicator indirectly measuring business investments dropped by 8.3 percent to 81 billion lek (Euro 565 million) in the first eleven months of 2013 compared to the same period in 2012.
Meanwhile, the profit tax paid by the business community dropped by 10.7 percent to 13.5 billion lek (Euro 95 million) in the first eleven months of 2013, just one month before Albania switched to progressive taxation which increased the corporate income tax for mid-sized and big enterprises from 10 to 15 percent.
Since the onset of the global financial crisis in 2009, the Economic Sentiment Indicator, measuring both business and consumer confidence, has been below its long term average.
Starting January 2014, the income tax for businesses with an annual turnover of more than 8 million lek will increase to 15 percent, compared to 10 percent under the previous flat tax system in force from January 2008 to December 2013. The move was strongly opposed by the business community.
Representatives of business associations say government must first lower informality, estimated at around 30 percent of the GDP, before increasing taxes. “Initially there must be targets for the reduction of informality. The fiscal package is a burden to enterprises. In our opinion, this package is hurried and not well-thought.”
Albania’s business community has warned the shift to progressive taxation will have a negative impact on the attraction of foreign direct investment, which in the past few years has ranked the country as one of the top recipients. The Konfindustria association says progressive taxation on personal and corporate income would lower Albania’s competitiveness at a time when regional countries such as Macedonia, Serbia, Montenegro and Bulgaria apply a 10 percent flat tax.
