TIRANA, May 13- The Municipality of Tirana has collected 44 million euros in revenues from the infrastructure tax, which amount to 40 percent of overall taxes and tariffs the City Hall imposes. This tax is affected by the construction boom around the Albanian capital, and local finance experts assert that the dependence on this tax signals structural weaknesses in local fiscal autonomy, as the income is higher than foreseen.
The Municipality of Tirana has secured approximately 21.6 billion lek in revenues, or 173 million euros in 2018, from its own funds, and the conditional and unconditional transfers, reaching a record level. This information comes in accordance to data published by the Co-Plan project at financatvendore.al. Compared to the previous year, total municipal revenues have increased by 30 percent, and compared to 2015 have more than doubled, being 130 percent higher.
From the revenues from taxes and fees, the Municipality collected 13.1 billion lek or 106 million euros, an increase of 32 percent compared to 2017. This amount accounted for 60.6 percent of the total income the municipality had available during 2018, where 41 percent came from taxes and 19 percent from tariffs, in relation to total budget. The remainder is provided by conditional and unconditional transfers from the central government budget as well as by separate taxes, which come from vehicle registration, rent of mines, and the transfer of ownership rights.
In comparison with 2015, the revenues that the Municipality has collected from taxes and fees almost tripled. The main effect on this significant increase in revenues has been the infrastructure impact tax during the last three years (2016-2018). This tax has become the key for the Municipality of Tirana for two reasons, first by the increase in the tax from 4 percent of the cost to 8 percent of the sales price, and secondly by the increase of construction permits in Tirana. As mentioned the revenues from infrastructure impact tax in 2018 were about 44 million euros, marking a record level. The municipality has received 60 percent more income than initially planned from the construction permits given, as it was planned to collect only around 3.4 billion lek (27.5 million euros) from the infrastructure impact tax.
According to Albanian Institute of Statistics (INSTAT) data, 388 construction permits were issued during 2018 in Tirana, from 231 in the previous year. The number of permits is much higher than a few years ago and marks the record, at least since 2005. An earlier record was in 2010 with 254 permits in total. Stronger growth has been the area provided for construction permits in the capital. Permits with a total area of 940 thousand square meters have been granted for the whole year, from 521 thousand in the previous year, with an increase of 80 percent. Only in the fourth quarter on 2018 were granted permissions for a construction area of 456 thousand square meters, or 70 percent of the total land area given in the country for construction permits for this period.
Local finance experts point out that the unstable nature of income from this tax based on seasonality and concentration of developmental pressure on a limited number of municipalities, or being the subject of development policies, and also collecting more than 75 percent of its revenues in three municipalities, signals structural weaknesses in local fiscal autonomy. The second item is expected to bring more revenue to this year’s budget at about 17 percent of the total, is the ‘cleaning fee,’ out of which nearly 2 billion lek (16 million euros) have been collected. The ‘real estate property tax,’ from which about 1.8 billion lek (14.5 million euros) were collected. This invoice also has the highest performance of the plan for only 76 percent, because it was not possible to start collecting the tax based on the new formula on the value of the property. This method is expected to begin to be applied this year and the tax rate will be expressed in percentages, as for buildings used for housing at 0.05 percent, and for buildings used for economic activity, too, at 0.2 percent.
Recently, the Municipality of Tirana has appointed as a real estate tax collector the Tirana Water Supply and Sewerage Agency. All citizens must go to make self-declaration of the areas they own or use within four months, information that will then be verified by the Agency. As a consequence the Municipality expects to collect 2.4 billion lek (19.4 million euros) from this tax, with a 35 percent increase from last year, where the biggest addition will be to the family members who will pay more than double in 2019 and four times more by 2021 (from 220 million lek in 2018 to 900 million lek in 2021).
This revenue growth has enabled the municipality to carry out more expenses, which amounted to 20 billion lek (162 million lek) in 2018, with an annual growth of 29 percent. Current expenditures account for 67 percent of the total, namely 13.2 billion lek (106.9 million euros), and only 6.7 billion lek (54 million euros) went to capital expenditures, of which 2 billion lek (16 million euros) per infrastructure, nearly 3.2 billion lek (25.9 million euros) for public services and 1.2 billion lek (9.7 million euros) for education.
Compared to the previous year, although there was 30 percent more available income, capital spending increased by only 7 percent, while administrative expenditures by almost 30 percent. This has caused the share of capital expenditure to drop to 34 percent, from 38 percent the previous year. Compared to 2015, staff costs doubled to 4.8 billion lek (38.9 million euros), accounting for 24 percent of the total. In value, staff expenses were as much as 71 percent of those in 2018.
