TIRANA, Sept. 28 – The World Bank has called on the Albanian government to guarantee social safety nets to the poor and vulnerable affected by reforms such as the nationwide campaign against tax evasion.
Since Sept. 2015, the government has launched a nationwide campaign against informality estimated at 30 percent of the GDP which has forced thousands of informal SMEs to register with tax authorities while thousands of small businesses have closed down claiming unaffordable taxes. Recent legal changes have also increased fines on informality by 10 to 50-fold.
“The government should guarantee adequate social mechanisms to address the short-term consequences or issues that could affect the poorest segments of the society. In this respect, the role of social assistance packages, and their adjustments to directly respond to every direct consequence that these reforms have on people in need in critical,” said Tahseen Sayed, the World Bank country manager for Albania, introducing a report this week.
The World Bank says the nationwide campaign against informality is a key reform with positive impacts on the economy, but suggests the Albanian government should provide subsidies as the operation will have negative effects on some sectors of the economy in the short-term and affect the poor. Sayed says subsidies should target the poor the same as the government did with the electricity price increase for household consumers after prices were unified lifting the low consumption threshold charging lower prices.
Other experts say the campaign against informality could temporarily affect employment and consumption because of the cut of thousands of informal jobs.
In line with the Albanian government and the IMF, the World Bank has revised downward Albania’s GDP growth for 2015 to 2.7 percent and expects the country’s economy to accelerate to 3.4 percent in 2016 and 3.5 percent in 2017.
