Radical Slash Of Social Insurance Tax

TIRANA, Aug 20 – In an effort to promote payment of the social insurance for the Albanian employees the government reduced the payment for social insurance to 15 percent.
The government made the second action in two years. In 2006 it lowered it from 43 to 31 percent of the salary and on Wednesday to 15 percent (starting from January 2009) in what followed as a positive consequence the “progressive consolidation of the fiscal discipline,” as Prime Minister Sali Berisha said.
The government approved in June a plan to raise pensions in urban areas by 10 percent and in the countryside by 15 percent.
The raise will also come into effect from July 1. The government also raised the minimum wage in February by 10 percent following recent hikes in the price of bread.
The minimum wage now stands at 16,000 leks per month.
Though the payment is a moderate one many private companies and individuals themselves do not pay it, something which, on its side, affects the future of the payment of retired people.
Only 46 percent of the employees pay the social insurance.
Most of the social insurance payment should be done by the employer but it is often learnt that they either do not pay it at all or declare only a small number of employees working for them.
The recent blast of March 15 in Gerdec at an ammunition disposal factory also showed that a company employing hundreds of people paid social insurance only for two or three persons.
That is the ‘rule’ especially in construction business and also all self-employed individuals rarely pay social insurance.
Authorities said that after the reduction of the payment two years ago the collection of insurance money had increased by 33 percent, a move which they hope will be followed with after the last decision. That is an effort to reduce the informal economy in the country, considered with its highest rate in the region. The government said that another significant deep reform will be undertaken to set the pension scheme on new secure basis. The premier gave no details or indication what that meant. “I am convinced that the Albanian and international business will welcome that (decision),” said Berisha at the cabinet meeting.
But at the same time the government also decided to increase the amount of money the private employees pay with 13 percent.
The opposition denounced the move saying that the government was not transparent but only promoting its good moves. They also said that the recent increase asked from the private business is not what the executive and its premier was trumpeting. Experts also believe that is another move form the government to cope with the increase of the retired people and the health insurance, which in total ask for 250 million Euros a year, a great amount of money in a poor country like Albania. The insurance institute covers only 58 percent of its budget and the rest is subsidized from the government.
The World Bank has often criticized and warned the government threatening of a future serious crisis unless deep reforms are undertaken to cope with an increase of pension payments in the future.