TIRANA, Sept. 13 – With little room left for a new hike in key taxes, the Albanian government is about to introduce a new tax that will boost the current small amount of property tax it collects, but this won’t happen before next year’s general elections.
The reform is expected to shift property tax calculation from its current rate depending on the size and location of the property to a formula based on current market value by end-2017, in considerably higher rates.
“We will prepare a concept note for the development of a national fiscal cadastre that outlines the legal framework and institutional roles, responsibilities, and processes for the design and data collection for property valuation. We will accelerate the digitalization of the registry,” the Albanian authorities have informed the International Monetary Fund.
“In parallel, with help from IMF, we will develop a valuation formula and methodology, and draft the related legislation by end-September 2016. By end-2016, the legislation enabling local governments to implement the valuation-based property tax will be approved by Parliament. From 2017, the new methodology for a valuation-based property tax will be applied in Tirana on a pilot basis,” they add.
To encourage voluntary reassessment of property valuation, the Albanian authorities have undertaken a temporary reduction in capital gains tax on property valuation from 15 percent to 2 percent.
The amnesty envisaged to be effective until late February 2017 is expected to give a boost to the real estate market, which has been suffering poor demand and negatively affected by the increase of the corporate income, dividends, rents and capital gains by 5 percent to 15 percent since 2014. It comes three years after a similar property reassessment amnesty at a 1 percent rate.
In its latest country report on Albania, the IMF which has supported Albania with a Euro 331 million loan, says fiscal structural reforms to enable a valuation-based property tax and strengthen public financial management are crucial for entrenching the consolidation gains.
“Steps to introduce a valuation-based property tax should be expedited. The proposed temporary reduction of the capital gains tax on property value reassessments should support the implementation of the property tax reform agenda,” says the IMF.
Property tax levied on buildings and agriculture land accounts for only about 0.8 percent of total taxes in Albania, a small amount even compared to regional EU aspirant countries.
Albania holds an advantage when it comes to its geographical position and access to ports and cheap labour costs but its tax burden is one the region’s highest, being a barrier in the attraction of foreign direct investment, according to a report by the Investment Council, a government advisory body facilitating dialogue with the private sector.
