The International Monetary Fund has opposed three initiatives proposed by the Rama government. These include the fiscal amnesty, the abolition of profit tax for all small businesses up to ALL 14 million annual revenue, and the abolition of VAT for all small businesses with a turnover of up to 10 million ALL.
Following an official visit to Tirana that ended yesterday, they published their official statement which included criticisms of the plans.
According to the IMF, the current proposal to remove the profit tax until 2029 and VAT is concerning. They said that support for businesses is needed but needs to be temporary, targeted, transparent and a part of a credible medium-term fiscal framework.
Thresholds for business profit tax and VAT should be unified at a carefully designed level. By setting the threshold too high and for too long, this will erode the tax base and undermine tax compliance.
Effective systems to detect tax evasion and prevent opportunities for money laundering and corruption are required, therefore they advised against the proposed tax amnesty.
The amnesty would allow the declaration and deposit of assets legally in banks without any fiscal obligations or criminal liability. Aimed to formalise the money of Albanians, it will not apply to state police, high-ranking public officials, politicians, magistrates, and those convicted of some crimes. The exemptions will not apply to those who served more than three years before the law goes into force. That means all former state officials will be able to benefit from the amnesty.
The IMF noted that due to the fallout of the 26 November earthquake and the COVID-19 pandemic, Albania’s economy is expected to contract sharply in 2020 before rebounding in 2021. They said that levels of uncertainty remain high.
While support for Albanians is needed, it needs to be part of a credible fiscal framework.
“Once the effects of the shocks subside, it will be critical to resume revenue-based fiscal consolidation and put public debt on a sustained downward path to rebuild room for fiscal policy manoeuvre.”