The Albanian Parliament, after a long session and numerous debates, approved the budget for the 2018 fiscal year. The draft budget was accompanied by the relevant Report and several presentations.
According to the Albanian government, the 2018 budget will have more resources available. This will be due to the government’s target to deepen and expand the fight against informality. Particular focus will be set on real estate taxes, where Albania is lagging behind regional and EU countries as an important source of local government revenue and market regulator. The property tax in Albania so far has been set at a fixed value, while since January 2018 it will be based on the value of the property. This tax will be set at 0.05% for individual owners. It is estimated that there will be an increase in revenues of about 21 million euros due to this tax.
The average level of public investments will be 5% of the country’s GDP. The government is committed to continue the support of several of the major on-going reforms: the water supply reform, the justice reform, the public administration reform, the public finance management reform and administrative-territorial reform.
There are several changes that affect the budget of the local governance. For the first time ever, as a result of the implementation of the new Law on Local Government Financing approved in April of 2017, 2% of the personal income tax revenues will be transferred to the local governments’ budgets. Revenues from the units of local self-government for 2018 are expected to be 9% higher than those of 2017 mainly because of the property tax increase.
The deficit for 2018 is planned to be at 2.0% of GDP. The level of the targeted public debt is expected to decrease by about 2.5%, reaching 68.6% of GDP and to continue this trend in the medium to long term. The deficit financing will be realized through domestic and foreign borrowing, favourable-term loans in support of development policies undertaken by the Government and commercial loans in case the conditions of financial markets are optimal.
One of the most discussed issues of the draft budget was the increase of investment through the public private partnership. The Albanian government plans to increase the investments in infrastructure, which are estimated to be 16% higher than in 2017, and aims mostly to finish some of the most important road, like the Tirana – Elbasan highway and Fieri bypass.
The budget law was approved only by the majority’s member of parliaments. The opposition’s parties did not vote for the budget law, stating that it increases taxes by 2 billion euros. On the other hand the government has stated that the increase in the revenues in the budget is mainly due to the improvement of the tax collection and tax administration performance. During 2018 the Albanian citizens will pay more for real estate tax, water supply in Tirana, cigarettes, luxury cars and 9,000 new businesses’ inclusion in the VAT scheme, due to the reduction of the turnover limit from 5,000,000 ALL per year to 2,000,000 ALL per year.
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Senior Accountant, Eurofast Global Albania
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