By ERVIN LISAKU
TIRANA, Jan. 20 – With public finances struggling with poor growth rates, the Albanian government is considering awarding a 10-year concession on the value added tax, the country’s key tax levied at a fixed 20 percent rate on almost all goods and services and accounting for about a third of total government revenue.
The project was announced on Wednesday by Finance Minister Shkelqim Cani in a meeting with journalists where he said that the new public-private partnership targets increasing revenue from the key tax.
Deputy Finance Minister Irena Beqiraj said the concessionaire establishing a new technological platform will be selected through an international tender in a bid to ensure better tracking of the VAT chain and improve its collection. “It will be a 10-year concession with an investment project of €9.57 million,” she said.
The decision comes after a nationwide campaign against informality launched last September failed to increase government revenue although thousands of businesses previously operating informally registered with authorities.
“There are problems with the declaration of VAT because fiscal receipts are not declared in real time. There are also problems with the tracking of products from the customs office to consumers and there is the risk of falsifying fiscal receipts which was also proved in the latest fiscal receipt lottery,” said Beqiraj.
“It is impossible for the tax administration to verify every business issuing fiscal receipts and technology is needed,” added the deputy finance minister.
The Albanian government says the concessionaire will benefit bonuses only for an annual increase of more than 11 percent in VAT income, otherwise it will only be paid about €957,000 a year which is the value of total investment divided by 10 years. The concessionaire’s operating cost is estimated at €8.2 million.
Last October, the Albanian government received an unsolicited bid by a Hong Kong company to collect VAT in Albania and organize the fiscal receipt lottery but the proposal was reportedly turned down. It is not known whether the Hong Kong-based M.POS company has received a bonus for the unsolicited bid which would give the company an advantage in the expected international tender.
In its latest fiscal transparency evaluation report on Albania, the International Monetary Fund warned some 55 public-private partnerships that the Albanian government has signed, have created commitments with a present value of about 7 percent of the GDP, in which the government will either pay the cost of the investment in installments or guarantee the revenue of concessionaires.
Latest finance ministry data shows the value added tax dropped by a slight 0.1 percent to 113.6 billion lek (€804 mln) in January-November 2015 compared to the same period in the previous year, but yet accounting for a third of total government revenue.
Experts against
Business representatives and economic experts have opposed the project as increasing costs and undertaken without being consulted with the business community.
Nikolin Jaka, the head of the Tirana Chamber of Commerce and Industry, said the concession unveils government’s inability to manage VAT.
“Awarding a concession on the VAT administration unveils government’s management inability and the transfer of public funds to private companies. If we refer to public services concessions that have been awarded up to now, they have failed. One of the most flagrant cases is Rapiscan [the customs scanning concession] which has caused a lot of problems to the business community,” said Jaka.
Zef Preà§i, an economic expert, is also skeptical about the new planned concession considering increased costs and lack of supervision the current public-private partnerships have produced.
“The public opinion is unclear regarding the decision. There is a hurry to delegate important basic services to the private sector. In a poor country with a high corruption level and weak institutions such as Albania such concessions are doomed to failure,” he said as quoted by local media
