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How is the government trying to favor the oligarchs of towers and resorts...
The International Monetary Fund has given the government a shock regarding the new budget. In the fiscal package, the executive foresees a "fiscal peace", but this is viewed with suspicion by internationals.
IMF mission chief Anke Weber has openly rejected the concept of Fiscal Peace and the massive debt write-off that the government has included in the new fiscal package.
During a press conference today, Weber was asked about the Fiscal Peace agreement and the amnesty schemes and gave a blunt warning. She said the IMF had looked at the draft and noted progress in some areas, but stressed that important elements of the proposal jeopardize fiscal justice.
“We have seen the latest draft of the package and note that the government has made significant progress over the last year in strengthening revenue administration, in line with our advice. However, we are concerned that some of the elements of the proposal could undermine Albania’s recent progress in tax administration and create some risks to compliance and fiscal fairness ,” Weber stated at the conference.
Her warning falls directly on Fiscal Peace, a scheme that the government presents as a voluntary agreement with businesses to prepay taxes in exchange for not conducting audits for a year. In reality, the scheme changes the profit tax formula and creates a huge advantage for the tower and resort industry.
According to the draft law, businesses with revenues over 14 million lekë that declare in advance an 18 percent increase in profits will be entitled to enter into an agreement with the tax administration. The declared profit is taxed at 15 percent. Any profit above this level is taxed at only 5 percent.
The draft allows for the restatement of the last five years' accounts at a 5 percent rate. This mechanism gives businesses a clear opportunity to allocate profits as they wish, and the IMF sees this as a circumstance that creates a clear inequality among taxpayers. Tower and resort developers control the timing of contracts and collections.
This gives them the ability to manipulate the pace of profits and benefit from the drastic tax cut. Ordinary businesses do not have this opportunity. For them, the predetermined 18 percent increase is a financial risk. For the tower developers, this is a simple maneuver. This is the essence of the IMF's criticism.
The package also includes a broad write-off of tax and customs debts. The draft write-off stipulates the full write-off of outstanding debts until December 31, 2014. The amount amounts to around 525 million euros. At Customs, the bulk is fines and late payment interest worth 200 million euros. For debts from 2015 to 2019, partial write-off is foreseen, provided that businesses pay 50 percent by June 30, 2026 or 75 percent by the end of 2026. For debts incurred from 2020 to 2024, only fines and late payment interest are written off, provided that the entire principal is paid.
The IMF links the risk of the Fiscal Peace scheme to favoring a narrow group of businesses that have the flexibility to manipulate annual profits. Weber's warning puts the government in a difficult position. The draft pushes towards a model where large builders pay less than ordinary businesses. The IMF's reaction highlights a problem that the government has overlooked. Fiscal Peace creates inequality and risks transforming into a facilitating tool for sectors that have been benefiting from preferential treatment for years. /Pamphlet
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