Aurela Gjokutaj

Eduart Gjokutaj

Albanian Budget Performance

1996 - 2016

ALBANIAN FISCAL PAPERS

AFP-2018/02/02 - ALTAX
 Law. Fiscal. Transparency

Albanian Budget Performance

1996 - 2016

ALTAX Center
Fiscal Papers,
No. 2018/02/02
www.altax.al
altax@altax.com
Date 15.02.2018
Tirana, Albania

Fiscal statistical data from Albanian budget indicators 1996 -2016, as well as
comments on their share, structure and impact on the economy and the well-
being of citizens, according to the importance and level of governance

www.altax.al Albanian Budget Performance 1996 - 2016 1

 Law. Fiscal. Transparency

Albanian Budget Performance 1996 - 2016

Fiscal statistical data from budget indicators, as well as comments on the share, structure and
impact of the economy according to the importance and level of government

SUMMARY
The Albanian Taxation Association (ALTAX) introduces this statistical paper with comments on government budget
revenues, expenditures and investments made, enabling comparative performance in these two decades that
summarize budget performance information. The data and comments presented in this text may serve for scholars
and experts of the economy and public finances by drawing their conclusions when analyzing the performance of
statistics over the last 20 years.

This study describes progressive research by ALTAX experts and is published to receive comments and encourage
debate.

The purpose of presenting this paper helps achieve a fuller and clearer perception of fiscal performance by
modeling spending and revenue, as well as to provide elaborate information for system analysis and in support of
proposals for concrete, legislative interventions to improve the public finance system.

This paper is prepared by ALTAX experts in the series of thematic fiscal summaries, with the aim to be as a source of
discussion for all those interested or having an inseparable connection with the tax and public finances on the
implementation of their practices. The author is © ALTAX Center and anyone who will use this text is required to
mark the authorship as a reference in its publications.
The document can be found on the website http://altax.al/al/publikime-te-altax
If you have requests and altax@altax.al

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 Law. Fiscal. Transparency

© 2018 ALTAX FP-2018/02/02

This study describes the ongoing research by ALTAX experts and is published to receive comments and to
encourage debate on the government budget, economy, investments, taxes and welfare of Albanian
citizens for the period 1996 – 2016

Prepared and distributed by Aurela Gjokutaj, Eduart Gjokutaj

Abstract

With the fiscal performance analysis for the fiscal period 1996 - 2016, we aim to show whether the public
expenditures have been able to meet the budget target of revenue collection according to the government's
objectives, and whether progress is made towards achieving the goals politics of left and right governments.

The study was conducted through many sources of information, where data and information were crucified to
verify accuracy. The statistics report and analysis has gone through the stages of (a) statistical survey, (b)
aggregation of data, and (c) processing and analysis.
The main source is the data of the Fiscal Bulletin of the Ministry of Finance and Economy, and Fiscal Programs
of Governments of 20 years. Other sources used are documents from the Institute of Statistics, Annual
Reports of the Bank of Albania, Taxes, Customs and other central institutions, institutes and local and foreign
organizations.
Views and comments from public finance experts, scholars and academic staff, or interested parties are
welcomed to reach the most accurate assessment based on typical methodology and correct data. The study
report is divided into three parts.
For comment on the report, you can contact altax@altax.com .
JEL codes: H20, H51, H54, H63, H71,

Keywords: labor taxes, capital taxes, fiscal productivity, Albania, taxes, VAT, budget incomes, public spending

The authors' electronic address: aurelaaliaj@altax.al and edigjokutaj@altax.al

The publication you can download HERE !

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CONTENT

Introduction Page 5

1. Budget Revenues Page 7

Gross Domestic Product. Inflation

1.1 Budget revenues in Albania Page 9

1.2 Budget revenues from tax and customs Page 10

1.3 Economic growth, inflation and budget revenues performance Page 14

1.4 Ratio of budget revenues and their subcategories to GDP Page 15

2. Public expenditures Page 17

2.1. Public expenditures according destination Page 17

2.2. The administrative cost of the government budget Page 19

2.3. Share of public expenditures to GDP Page 20

2.4 Ratio of public expenditures to budget revenues Page 21

3. Performance of fiscal basis Page 25

3.1. Performance of budget revenues, according to the fiscal base Page 25

3.2. The structure of revenues from taxes and customs and their tendencies Page 27

3.3. Share of taxes to GDP Page 29

Conclusions Page 31

ANNEX Page 33

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 Law. Fiscal. Transparency

INTRODUCTION

The government budget shows the government's proposed revenues and expenditures for a financial year
that passes by the legislature and is approved by the Albanian Assembly as calculated and presented by the
Minister of Finance of the country. With the fiscal performance analysis for the fiscal period 1996 - 2016, we
aim to show whether the public expenditures have been able to meet the budget target of revenue collection
according to the government's objectives, and whether progress is made towards achieving the goals politics
of left and right governments.

Fiscal policies and fiscal administration can be considered as a combination of puzzle parts to complete the
whole. The administration of tax obligations, built on the columns of procedures and rules through functional
organization, has attempted in the last 10 years to approach the principles of good governance and in
response to taxpayer requirements. Over the years, tax administration is less intrusive in business decision-
making. Businesses and individuals have developed activities more independently and are more reluctant to
make decisions about the administration.

This analysis is worth introducing the allocation of budget items by destination, but also variance and analysis,
as well as evaluating realistic results from budgeted values.

Another goal is to give scholars practical skills in reconciling the budget revenues realized with the value spent
by governments through variances in different items trying to conclude who has affected the budget deficit
and how much it has been affected for the future.

This text focuses on the use of performance measurement of the public budget. Based on a national analysis
of government revenues and expenditures over 20 years, it is noted from the performance analysis for a range
of budget items to look at the tax destination that each of the Albanian citizens pays in the budget.

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Clarification of terms

1 Labor taxes The tax on wages and social and health insurance contributions

2 Capital taxes Profit tax, Personal Income Taxes (without wage tax), gambling tax and small
business tax

3 Taxes on consume Value Added Tax, Excise tax and Custom duties.

4 Local taxes The Local taxes, and property taxes

5 National taxes The national taxes, the road tax (2002 - 2011) and the solidarity tax (1998 -
2008)

6 Non-tax budget The revenues coming from receipts from budget institutions, fees collected
revenues from their services, and transfer of profit from the Bank of Albania

7 Social The budget expenditures for special funds and other expenditures
expenditures (unemployment, economic assistance and compensation)

8 The administrative The ratio between operating and administrative expenses with budget
cost of budget revenues

9 GDP Gross Domestic product

10 GTD General Taxation Directorate

11 GCD General Customs Directorate

12 VAT Value Added Tax

13 ST Sales tax

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1. Budget Revenues
Gross Domestic Product and Inflation rate

Domestic production in Albania for the period 1996 - 2016 has an increase of 3.3 times1. GDP in
1996 was ALL 346.4 billion, and 20 years later it was added to the value of ALL 1.5 trillion. An
increase in these macroeconomic dimensions comes from contributing to the economy of the
construction sector, the services sector and the trade sector, where the difference comes from
the decline of the share of the agricultural sector in the economy and the growth of the above
sectors2.

By comparing the value of GDP between the years that limit the period 1996 - 2006, the growth
of domestic production is 2.5 times. If we make a comparison for the period 2006 to 2016, the
domestic output growth is 70 percent. From the analysis of each of the decades of economic
development, the economy has expanded with larger dimensions in the first decade (1996 -
2006). While in the second decade this development has shrunk by 3 times less due to a major
deterioration mainly due to the lack of a clear model for implementation in the economy, but
also due to the increased presence of political corruption and lack of investment public and
private long-term for strengthening the technical and human capacities in the country.

GDP AND INFLATION PERFORMANCE, 1996 2016

50.0

40.0

30.0

20.0

10.0

0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-10.0

-20.0

ECONOMIC TRENDS INFLATION

1
2016 compared to 1996
2
http://www.instat.gov.al/al/publikime/librat/

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The graph shows that in 1997, when GDP declined by 10.8%, inflation grew by 42.1%. This is a
historical growth of inflation in the history of the Albanian state.

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Box 1 Tax rates in Albania, 1993 - 2017 in %

Social and
Value Tax on Small
No Years Sales Tax Profit tax Personal/Individual Income Tax Health Comments and clarifications
Added Tax Business
Contribute
NO threshhold for sales tax
1993
1 15, 20 ¹ 30, 40, 50 ³ 10, 15, 20, 25, 30 ⁴ 3, 5, 6, 8, 10 ⁵ 42.5 ⁶ Wage non taxable if < ALL 4.000
1994 Tax on Small business assessed in valorum for specific economic activities

2 1995 15, 20 30, 40, 50 5, 10, 15 ⁴ 3, 5, 6, 8, 10 45.9 ⁶ Wage non taxable if < ALL 7.000
VAT introduced
3 1996 12.5 ² 30, 40, 50 3, 5, 10, 15, 20 ⁴ 3, 5, 6, 8, 10 45.9 Threshhold for VAT registration, if turnover > ALL 2 million
Wage non taxable if < ALL 10.000
4 1997 12.5, 20 ² 30, 40, 50 1, 2, 3, 5, 10, 15, 20, 25, 30 ⁴ 45.9
5 1998 20 30, 40, 50 0.5, 1, 2, 3, 5, 10, 15, 20, 25, 30 45.9 Threshhold for VAT registration, if turnover > ALL 5 million ²
6 1999 20 30 ³ 0.5, 1, 2, 3, 5, 10, 15, 20, 25, 30 45.9
Wage tax calculated according to progressive rates and threshhold amount
7 2000 20 25 ³ 0.5, 1, 2, 3, 5, 10, 15, 20, 25 ⁴ 45.9 Threshhold for VAT registration, if turnover > ALL 8 million ²

8 2001 20 30 0.5, 1, 2, 3, 5, 10, 15, 18, 20, 23, 25 ⁴ 45.9

9 2002 20 4, 5, 30 ³ 0.5, 1, 2, 3, 5, 10, 15, 18, 20, 23, 25 45.9, 41.9 ⁶
Wage non taxable if < ALL 14.000
10 2003 20 4, 5, 25 0.5, 1, 2, 3, 5, 10, 15, 18, 20, 23, 25 41.9
11 2004 20 3, 25 ³ 0.5, 1, 2, 3, 5, 10, 15, 25, 30 ⁴ 41.9
12 2005 20 1.5, 23 ³ 0.5, 1, 2, 3, 5, 10, 15, 20 ⁴ 41.9
13 2006 20 1.5, 20 0.5, 1, 2, 3, 5, 10, 15, 20 41.9, 32.9 ⁶
14 2007 20 1.5, 20 10 ⁴ 32.9 Wage non taxable if < ALL 10.000
15 2008 20 10 ³ 10 32.9
Threshhold for VAT registration, if turnover > ALL 5 million
16 2009 20 10 10 32.9, 27.9 ⁶ Minimum wage ALL 18.000 ⁶
17 2010 20 10 10 27.9
18 2011 10, 20 ² 10 10 27.9 Reduced VAT rate 10% for medicines and health services
19 2012 10, 20 10 10 27.9
20 2013 10, 20 10 10 27.9
Abolition of VAT rate 10%, reduced for medicines and health service,
21 2014 20 ² 15 13, 23 ⁴ 27.9 starting from 2015.
Progressive wage tax rates
NEW VAT law introduced
22 2015 20 ² 15 13, 23 27.9 Abolished the Small Business tax
23 2016 10, 20 15 13, 23 27.9
Reduced VAT rate 6% for tourism accomodation.
24 2017 6 ², 10, 20 15 13, 23 27.9 Threshhold for VAT registration, if turnover > ALL 2 million, starting from
April, 1st 2018
Source: Assamble of Albania

¹ Law 7676, 02.03.1993

² Law 7928, 27.04.1995; Law 8240, 16.09.1997; Law 10363, 16.12.2010; Law 182/2013, 28.12.2013; Law 92/2014, 24.07.2014; Law 71/2017, 27.04.2017; D.C.M. 36, 17.01.1998; D.C.M. 727, 28.12.2000; D.C.M. 953, 28.12.2014;
D.C.M. 652, 10.11.2017

³ Law 7677, 03.03.1993; Law 8438, 28.12.1998; Law 8711, 15.11.2000; Law 8979, 12.12.2002; Law 9326, 06.12.2004; Law 9431, 13.10.2005; Law 9716, 16.04.2007; Law 9766, 09.07.2007;
⁴ Law 7786, 27.01.1994; Law 7897, 02.02.1995; Law 8091, 21.03.1996; President Decree 1673, 20.12.1996; Law 8438, 28.12.1998; Law 8711, 15.11.2000; Law 8841, 11.12.2001; Law 9766, 09.07.2007; Law 177/2013,28.12.2013
⁵ Law 7679, 03.03.1993
⁶ Law 7703, 11.05.1993; Law 8889, 25.04.2002; Law 9600, 27.07.2006; Law 10070, 05.02.2009; D.C.M. 522, 13.05.2009

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References

ALTAX, Dokumente Fiskale 2013, Analiza e treguesve buxhetorë për periudhën 1996 - 2012
Malgwi A Abdullahi, O. Unegbu Angus, Budget in Nigerian Public Sector: Need for Balanced Scorecard
Perspective
Ministria e Financave, Statistika Fiskale të Qeverisë, 2004 – 2008
Ministria e Financave, Treguesit e borxhit me instrumenta Financiare, 2007
Checherita Cristina, Rother Philipp, ECB, The impact of high and growing government debt on economic
growth: an empirical investigation for the Euro area
Kalaja Edlira, UT, Rëndësia e borxhit publik në ekonomi dhe vlerësimi I qëndrueshmërisë së tij: Rasti I
Shqipërisë
Banka e Shqipërisë, Raporti Vjetor 1996 – 2016
Qendra Shqiptare për Kërkime Ekonomike, Revista Ekonomia dhe Tranzicioni, 1997
Kadiu Dorina, UAMD, Roli i borxhit publik mbi rritjen ekonomike: Analizë empirike për rastin e Shqipërisë
në vitet 1992 2012
Schaeffer Michael, WB, Public Sector Management Thematic Group, Framework for Effective Local
Government Finance, 2005

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 Law. Fiscal. Transparency

Performance of Albanian Budget

Analysis of budget indicators for the periods 1996 – 2016

ALTAX Center
Fiscal Papers,
No. 2018/02/02
www.altax.al
altax@altax.com
Date 15.02.2018
Tirana, Albania

The Albanian Taxation Association (ALTAX) introduces this statistical paper with comments on
government budget revenues, expenditures and investments made, enabling comparative
performance in these two decades that summarize budget performance information. The data and
comments presented in this text may serve for scholars and experts of the economy and public
finances by drawing their conclusions when analyzing the performance of statistics over last 20 years

www.altax.al Albanian Budget Performance 1996 - 2016 11