Fiscal amnesty can be a good thing, but only if it is done the right way and for the right reasons.
TIRANA TIMES
The Albanian parliament has approved a fiscal amnesty bill that will allow businesses and individuals to declare funds they had previously hidden from authorities without having to fear repercussions from the tax enforcers.
The idea is that by opening the books, businesses and individuals can put back the liquidity into the economy, making it grow, create jobs, etc. It is not a bad argument.
Fiscal amnesty can be a good thing, but only if it is done the right way and for the right reasons.
Experts warn that fiscal amnesties like these only work if there is a clear message that this is a one-time deal, and those who continue to flaunt the rules will be severely punished.
If businesses and individuals get the idea that they don’t have to pay taxes, and wait for another amnesty instead, a terrible precedent would have been set.
The bill was controversial as it was being discussed, and there were several options on the table, but in its final wording it will allow businesses and individuals to get amnesty on all funds they did not declare before two years ago and partial amnesty for the most recent transgressions.
Then, as with everything in Albania these days, there is a political element to the story. The approval of the amnesty law comes on the eve of what can be considered to be vital local elections. Both main political groupings see these elections as an absolute must-win.
That’s because these elections might be local on paper, but they take on national character because the tense political climate in Albania. In a sense, they have been transformed into a referendum on whether there is more support for the government or the opposition in the absence of new general elections until 2013.
So it is not surprising then that there have been accusations on the government and its majority in parliament that it is trying to use the passage of the bill as another tool to try and influence the results of the local elections in its favor.
That situation is not unique to Albania. Politicians often act for electoral reasons. Individuals and businesses also no doubt look favorably on the amnesty, as it has the support of several representative organizations, but here too there are fears on how the law will be implemented. Albania often has the right wording in laws, only to be misinterpreted in implementation.
Fiscal amnesties have had mixed results when they have been tried in different countries. They do not cure the problem, particularly if it is systemic. But in the short term, if there is more money is infused into the economy at a time when it is direly needed, it will be a welcomed occurrence.
Despite government claims that the Albanian economy is doing well, there are clear signs that the country faces challenges. Whether they come from political instability and the fear that creates, or the general sense of economic malaise that has captured the region and out our closest EU members, big economic problems exist.
The fiscal amnesty might help. But only if it’s done right.
