Albania cuts business tax

TIRANA – Albania’s newly installed government has slashed taxes and fees for small businesses in order to fight tax evasion, boost employment and help family businesses grow, officials said yesterday. Living up to the key electoral promise of Prime Minister Sali Berisha, the registration fee for small businesses was halved to 100,000 leks ($1,000). The tax on firms’ turnover was lowered to 1.5 percent from the previous 4 percent. «Halving taxes for small businesses is a big attack against tax evasion,» said Berisha, whose Democratic Party has pledged to fight corruption and cut down red tape to invigorate business and reduce unemployment, currently at 14 percent. «We will make up for the resulting deficit by cutting government expenses,» Berisha added. Finance Minister Ridvan Bode said the lost revenues amounted to 10 million dollars a year. The move had the approval of the International Monetary Fund (IMF) and the World Bank. ‘Absurd’ system «We think that softening the tax level will increase employment through re-investment,» Bode said. «Cutting this tax does not mean revenues from small businesses will fall because actually its administration so far has been absurd.» To illustrate his point, Bode said a grocer in the suburbs of Tirana paid the same as a luxury boutique in the center. The tax cuts drew angry reactions from many mayors whose budgets rely on the registration fees and the revenue taxes of firms operating in their cities. Tirana Mayor Edi Rama said the move would be dangerous unless it was followed by compensation. Albania’s economy is still largely burdened by its Stalinist past and analysts say harsh reforms are needed to get it to a level where European Union accession could be feasible. Europe’s poorest country when communism collapsed in 1990, Albania has seen the economy grow by 6 percent a year over the last two years, although a quarter of its 3.5 million people still live in poverty. The informal economy is estimated at around 12 percent of GDP and almost 5 percent is made up of remittances from Albanians working in neighboring Italy or Greece.

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