The government plans that over the next two years, within the fiscal framework, it will eliminate certain reduced tariffs, exemptions from direct taxes, and those exemptions that have not produced the expected effect. In an official document on the compatibility of Albanian legislation with European Union directives, it is acknowledged that harmonization is an ongoing challenge that also requires increasing operational capacities and computerizing the tax administration, which affects its efficiency.
In this context, the document clarifies what Albania's priorities and plans will be through 2030 for aligning with and meeting the European Union's criteria in the area of taxation, and it appears that one of these relates to tax exemptions.
“Based on the Medium-Term Revenue Strategy, the Ministry of Finance and Economy has drafted and initiated a review of reduced rates and exemptions in the tax laws, which increase the volume of “tax expenditures,” in this context:
During 2024 and beyond, changes will be adopted to eliminate reduced rates and exemptions in direct taxes.
”During 2025 and beyond, the current exemptions in the field of value-added tax will be reviewed with the aim of eliminating those that have fulfilled their mission or that have proven unsuccessful in implementation and have not produced the expected effect," the government document states.
Exemptions from direct taxes or value-added tax have been criticized from time to time by international institutions, which consider this a problem that makes it more difficult to collect revenues and easier to evade taxes.
Over the years, government fiscal packages have provided exemptions mainly in VAT but also in direct taxes. Earlier, such exemptions included VAT relief for energy investors; later, a full-package exemption was granted to investors with special tourism status who brought in an international hotel brand, a practice that continues to this day.
The latter is one of the most criticized policies because it has on numerous occasions been labeled a form exploited by developers to avoid paying taxes on constructions not intended for tourism. Meanwhile, exemptions have been numerous over the years and affect a range of sectors.
Source: Monitor Magazine.