TIRANA, Nov. 20 – Unfair competition from informal businesses, mainly apartment and villa owners is a top concern for the overwhelming majority of businesses in the accommodation sector of Albania’s emerging tourism industry.
A recent survey conducted by the Albania Investment Council, a government advisory body, shows 71 percent of businesses operating in the tourism industry nationwide, admitted to facing unfair competition by unlicensed operators, in a situation that mostly affects licensed accommodation units along the country’s Adriatic and Ionian coasts, but also hits government revenue.
Albania has more than 1,200 licensed accommodation units with a capacity of more than 41,000 beds but the number of informal units, mainly apartments and villas offered for rent informally is estimated to be much bigger, unfairly competing with licensed operators by offering much cheaper prices due to often paying no taxes at all. Apartment owners are required to pay a 15 percent tax rate in case of offering them to tourists or local residents, but the tax is largely ignored outside Tirana.
Lack of qualified human resources, barriers in access to finance and inappropriate public infrastructure are also key concerns for the country’s tourism operators to handle the rise in the number of number of tourists visiting the country, according to the survey conducted by the Albania Investment Council. The government advisory body serving as a linking bridge between the business community and the government was set up in 2015 with support by London-based European Bank for Reconstruction and Development.
Albania’s Finance Minister Arben Ahmetaj says the government will further tighten the fight against tax evasion in the tourism industry by cooperation with leading global online booking platforms such as booking.com, where more and more unlicensed Albanian operators have been advertising apartments and rooms at rates of 10 to 25 percent and paying nothing in local taxes for their income.
“Soon, the fight against informality will go to another level, as negotiations are being held with digital platforms such as Booking.com and Airbnb to obtain official information from these platforms on all the structures leased in Albania,” minister Ahmetaj said at a recent meeting with tourism operators.
Albania tax authorities undertook a nationwide campaign in the country’s coastal areas last summer during the peak of the tourist season to tackle high tax evasion, imposing fines on hundreds of operators and even handing 30-day operation bans to several big hotels and restaurants.
The Albanian government says a new billing system enabling the real time monitoring of business to consumer and business to business operations will considerably improve efforts to tackle tax evasion in the country, estimated at around 30 percent of the country’s GDP.
Local tourism operators in the country are also worried over the high seasonality in the country’s summer and coastal based tourism that peaks in July and August and the relatively small amounts that foreign tourists spend in the country, often because of their short stays.
Tourist accommodation units have been facing a reduced 6 percent valued added tax for the past year, down from a previous standards 20 percent VAT, but the lower rate only applies to accommodation fees and excludes food, drinks or entertainment.
In a bid to promote elite tourism, the Albanian government is now offering tax incentives for four and five-star hotels with an investment value between €8 million to €15 million. However, the long-standing unclear property titles remains a key barrier to attract foreign investors, some of whom have abandoned their investment following disputes with local residents.
Earlier this year, the Albanian government selected 100 villages nationwide to upgrade their infrastructure and public services and promote agritourism by offering incentives and grants to support local characteristic agriculture products.
With more and more restaurants adopting a farm-to-table approach, the emerging agritourism sector will benefit from several tax incentives, including a 5 percent corporate income tax, a reduced 6 percent VAT and exemption from the infrastructure tax on investment starting next year.
Making an appropriate ‘star’ rating of accommodation units in order not to confuse tourists is also considered essential by tourism industry operators in addition to upgrading local road and waste management infrastructure.
Albanian authorities report the country was visited by more than 5 million foreign tourists last year, generating a record high of €1.7 billion in income, about 14 percent of the country’s GDP, but some travel industry experts say about 80 percent of those numbers are ethnic Albanians from regional countries or Albanian migrants based in EU or North America in a segment often referred to ‘patriotic tourism.’
