Government revenue in the first quarter of 2014 rose by 8.2 percent to 82 billion lek (Euro 576 million) boosted by double-digit growth in the value added tax and the profit tax.
TIRANA, April 29 – Albania’s budget deficit registered a record low for the first quarter in the past four years thanks to a recovery in government revenue and lower public investments. Finance Ministry data show Albania’s budget deficit dropped to 6.3 billion lek (Euro 44 million) in the first quarter of 2014, down 57 percent compared to the same period in 2013, registering the lowest level since 2011 for the first quarter of a year.
Government revenue in the first quarter of 2014 rose by 8.2 percent to 82 billion lek (Euro 576 million) boosted by double-digit growth in the value added tax and the profit tax.
VAT, which indirectly measures domestic consumption and is levied at a fixed 20 percent rate on almost every product and service, rose by 20 percent to 28.6 billion lek (Euro 201 million), accounting for the around 35 percent of total government revenue.
Profit tax collection also rose by around 18 percent as corporate income on medium-sized and big enterprises has increased by 5 percent to 15 percent starting January 2014.
Revenue from excise taxes were down by 13 percent in the first quarter of this year affected by a boom in imports of fuel and tobacco in December 2013 when government announced plans to increase taxes on these excise products.
Personal income tax collection dropped by 12 percent year-on-year in the first quarter of this year, reflecting the impacts of the progressive taxation government has adopted starting 2014.
Total government spending in the first three months of this year dropped by 2.4 percent to 88 billion lek on lower public investments which at 10.5 billion lek (Euro 74 million) were 27 percent lower compared to the same period in 2013 and the lowest for the first quarter since 2008 just before the onset of the global financial crisis.
Government spending on interest rates rose by 16 percent to 2.8 billion lek (Euro 20 million) as public debt stands at a record 70 percent of the GDP. Spending on interest rates on domestic debt also rose by 10 percent despite yields on 12 T-bills, the key instrument of internal borrowing, having almost halved to 3.6 percent during the past year.
The deficit in the pension scheme continued growing in the first quarter of this year when it climbed to 10 billion lek (Euro 72 million), up from 8.1 billion lek (Euro 57 million) during the same period last year, unveiling the need for reform in the pension system considering the huge deficit in the social security contributions and government covering around 45 percent of the deficit in other taxes.
Positive performance in December 2013, when imports of fuel and tobacco boomed ahead of tax hikes, helped the country’s public finances considerably recover although they could not escape a slight negative growth for the second year in row, a situation unprecedented in the past 16 years. Finance Ministry data show total government revenue in 2013 declined by 0.5 percent year-on-year on sluggish consumption and private investments, indirectly unveiled through the performance of VAT and imports of machinery and equipment.
Affected by underperforming government revenue and soaring spending in the first half of 2013 ahead of the June general elections, the budget deficit rose by a record 43 percent to 65.4 billion lek (around Euro 457 million) reaching around 6 percent of the GDP, double compared to the average in previous years.
In its economic and fiscal programme for 2014, government expects revenue to increase by around 12 percent compared to 2013, based on progressive taxation system on personal and corporate income tax and fight against tax evasion.
Government expects revenue from profit tax to increase by around 53 percent to 23 billion lek, up from 15 billion lek in 2013. Meanwhile, personal income tax is expected to increase by only 0.3 percent to 28.5 billion lek.
