Proposed fiscal package to increase taxes on households, ease burden for businesses
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Some taxes are expected to increase.
TIRANA, Nov. 18 – The annual fiscal package proposed by Albania’s government for 2016 would considerably reduce the tax burden on businesses, but slightly increase it for households and self-employed professionals, with the package foreseeing higher tax rates on cars, property as well as higher social security contributions.
Starting January 2016, personal five-seater vehicles with a cylinder volume of more than 3,000 cm3 will for the first time be considered as luxury cars and have to pay a registration fee of 70,000 lek (€500) and an annual tariff of 21,000 lek (€150). Car insurance is also expected to become more expensive as the tax rate on insurance premiums will increase to 10 percent, up from 3 percent currently.
Mining royalty on coal, bitumen and construction materials will be levied at fixed rates based on their quantity in tons and cubic meters to compensate for lower revenue from the sharp cut in base metal prices. The rates on metallic minerals and oil and gas have been left unchanged from 4 to 10 percent of sale prices.
In its 2016 fiscal package, the Albanian government says that apart from buildings and agriculture land, it will also tax non-agricultural land classified as available for construction ranging from 1,400 lek (€10) per hectare in remote municipalities to 5,600 lek (€40) per hectare in key municipalities.
The new fiscal package will also levy a fixed 140 lek per person (€1) tax on hotel accommodation compared to 5 percent of the fee currently due to abuses with issuing fictitious tax receipts.
The bill also envisages that people living on rented apartments and houses will also have to pay a real estate tax, which is expected to raise strong debates among renters due to higher costs. The withholding tax on rent rose by 5 percent to 15 percent this year and reference prices were set on rents to avoid abuses.
The fiscal package will also increase the tax burden for a series of self-employed professionals such as lawyers, notaries public, doctors and engineers who will now have to pay social security contributions at a maximum ceiling of 97,000 lek (€692) compared to starting from a minimum of 19,400 lek (€138) currently.
The excise rate on domestically produced beer, which accounts for around 90 percent of domestic consumption, has also been proposed to increase by 11 percent and reduce by 15 percent for imported beer, raising concerns about the effects on domestic production.
The excise rate on tobacco has been left unchanged at 110 lek (€0.78) per 20-cigarette pack following a drastic cut in imports due to consecutive tax hikes and a shift to domestically produced tobacco often traded informally at considerably cheaper prices.
In the midst of an aggressive nationwide campaign against widespread informality, the Albanian government has made a major concession, offering tax cuts to small and medium-sized enterprises, many of which will no longer have to pay any profit tax.
Some 83,300 small businesses with an annual turnover of up to ALL5 million (€36,000), accounting for 85 percent of total enterprises, will benefit. Businesses with a turnover threshold of ALL5 million to ALL8 million (€57,000) will also have their profit tax reduced to 5 percent, down from a current 7.5 percent starting Jan. 2016.
In their suggestions to the 2016 fiscal package, Albanian and foreign business communities have called on the government to revise downward key taxes and review the costly customs scanning concession which has increased costs.
While key taxes such as the personal and corporate income taxes remained unchanged, defying calls for a return to the flat tax regime after the corporate income tax was raised by 5 percent to 15 percent in 2014, the tax burden in 2015 further increased by raising the withholding tax on dividends and rents and capital gains to 15 percent, increasing the circulation tax on fuel and imposing higher excise rates on tobacco. Since 2014, the personal income tax is being collected under a progressive system, increasing the tax burden on high wages. In addition, electricity prices rose for business consumers and around three-quarters of household consumers in 2015.
The 2016 budget expects the Albanian economy to slightly accelerate to 3.4 percent, up from an expected 2.7 percent this year, recently revised downward on lower international oil and base metal prices affecting exports and spillover effects from the crisis in neighboring Greece.
