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In January 2022, the automatic indexation of excise duties with the official rate of inflation announced by INSTAT for the previous two years was applied, in order to reflect the increase in the consumer price index of goods above the level of excise duty applied, as and prevention of erosion in excises.
But since the last two years inflation has increased unusually, a new draft law decides that the indexation of the excise duty in fixed value will be done with the average inflation of the last 10 years, thus preventing another increase in the prices of goods. fuels with the rate of inflation. Thus, the excise tax for fuel will be indexed by 1.5% and not by the real inflation rate of the last two years, which is over 11%.
Otherwise, if this restriction will not be made, the excise duty level from January 2024 must increase +11.5% and if in the following years inflation will result in above-normal levels, the indexation will affect the increase in the prices of goods, such as fuel, alcoholic beverages, beer, wine, etc. According to the Ministry of Finance, the legal indexation of excise duties every two years was decided, based on the level of average inflation resulting in the last 10 years, which varied at the level of about 1.7% per year.
The purpose of this draft law is to limit the level of two-year indexation of excise duties, as a result of the legal obligation for their indexation with the official rate of inflation. The biannual legal indexation of excise duty rates was established, based on the average inflation level resulting in the last 10 years, which varied at the level of about 1.7% per year, otherwise the excise duty levels for excisable products would increase by an average 3-3.4 %, every two years.
Tobacco and cigarettes are excluded from this scheme, for which, for the period 2022-2026, an increase is applied every year, according to a certain schedule, provided in the excise law.
The Ministry of Finance clarifies that the rapid increase in inflation to "abnormal" levels over the last two or three years, as a phenomenon not only Albanian, but global, which was first triggered by the Covid-19 pandemic and then by the war in Ukraine, makes it necessary to revise the growth scheme. Both of these events damaged supply chains for several vital products, such as energy, oil and food.
This increase in inflation, with an average annual rate of 7.4% at the end of 2022 and 5.2% for the period January-August 2023, makes it necessary to limit the increase in excise duties due to inflation and the proposal of this draft law, with the aim of limiting of indexation of excise duties within the limits of a two-year accumulated inflation rate that does not exceed 1.5%.
Also, the draft law aims to fix the problem encountered in implementation by the customs administration, which must apply the indexation of excise rates from January 1 every two years, as a result of not knowing the inflation rate for the previous year from January 1 of the year descendants.
For this purpose, it is proposed that, for the effect of indexation, the calculation should include the inflation level of the second previous year and the 9-month period of the previous year. The anticipated effect on the state budget is expected to be around 1.5 billion ALL in total, divided into: 0.5 billion income from indexation with 1.5% every two years of the excise tax; 0.8 billion from the calendar approved for excise duty on tobacco and its by-products; and 0.2 billion from restrictive measures related to excise duty exemptions./Monitor
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