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Experts on local government and economic issues estimate that the draft law on changing the method of taxation of real estate will have an increasing impact on the fiscal burden of citizens.
The Executive Director of the Institute for Municipalities of Albania, Agron Haxhimali, estimates that the reform, as a whole, is expected to bring an increase in tax liability, as it simultaneously changes the base and rate of taxation, moving from a partial system towards taxation on the approximate market value of the property.
According to him, the impact will not be the same for all citizens.
"The increase will not be the same for everyone. The first home benefits from a discount of up to 50% of the value, within the thresholds determined by the municipalities; while exceptions are foreseen for families with economic assistance and certain categories of pensioners.
However, for properties in high-value areas, for second homes, land, and commercial properties, the burden is likely to increase significantly.
It should be noted that the new system for buildings is expected to start in 2029 and for plots in 2031; therefore, today an accurate invoice cannot be given to each family without the value maps, the evaluation methodology and the concrete decisions of the municipal councils.
But I emphasize that taxation based on market value is fairer - certainly when implemented correctly."
Mr. Haxhimali argues that taxation based on market value is, in principle, the fairest model, provided that it is implemented in a correct and transparent manner.
He emphasizes that the main challenge is not only related to the new taxation formula, but also to the administrative capacities of municipalities to implement it. According to him, real estate tax revenues in Albania account for only 0.27% of Gross Domestic Product, the lowest level in the region and among European Union countries.
In this context, he notes that municipalities have different administrative capacities, incomplete property registries, and different levels of their formalization.
The creation of the Fiscal Cadastre and the General Directorate of Property Tax is considered a positive step, but it underlines that the reform cannot be successful without investments in the property registry, inter-institutional data exchange, digitalization of services and strengthening the capacities of local administration.
Economic expert Zef Preçi says that the increase in real estate taxes should come only after structural problems of the market and property administration have been addressed.
"Real estate prices have been distorted by the influence of money of illicit origin and uncontrolled urban development. Basing the tax on these prices risks legitimizing these distortions."
Comparisons with countries in the region are incomplete if the quality of public services and infrastructure provided to citizens is not also compared.
The property registration process has not been completed, creating injustice, as the fiscal burden is borne primarily by law-abiding citizens. The priority should be to expand the taxpayer base, not increase the burden on those who already pay.
The real estate market requires greater formalization and stricter monitoring, to combat tax evasion, money laundering, and hidden transactions through cash payments or the use of third parties (“prestanome”).
It is necessary to draft a new and objective map of property values, to avoid injustices and inequalities in taxation.
Fiscal changes should take into account the contribution of immigrants, who have financed a significant portion of the country's housing and business building stock. The tax increase could have a disproportionate impact on low-income families who own homes in areas with high property values, even though their incomes have not increased.
"The increase in the tax on rental properties is likely to be transferred to tenants through rent increases, affecting even citizens who do not own real estate," he says.
In addition to changes to the residential and commercial property tax, the draft law provides for changes in the calculation of the tax liability for land and agricultural land. For these categories of real estate, the liability will also be calculated based on the market value.
The implementation is expected to start in 2030. The transition from an area-based land tax system to a market value-based tax system may increase the tax burden. For this reason, Article 31 establishes the application of a deduction from the assessed value of the parcel subject to taxation in the first two tax years, starting from the year of establishment of the market value-based tax on parcels.
The discount will be equal to 50% of the assessed value of the parcel./Monitor
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