IMF: Albania can increase income by 9% of GDP by 2030 by fighting corruption

Developing countries, where Albania is also classified, can increase budget revenues by 9% of GDP by 2030, if they implement some reforms related to the reduction of corruption, the fight against informality, the implementation of reforms and strengthening of institutions says an IMF study "Countries can use the tax potential to finance development objectives".

"Since 1990, some countries have been extremely successful in increasing incomes, such as Albania, Argentina, Armenia, Brazil, Colombia and Georgia, which all mobilized more than 5 percentage points of GDP, but this growth happened before the global financial crisis of 2008. After that, progress has been difficult and fragile", refer the experts of the Fund.

Budget revenues in value in our country have increased, but they have not improved the ratio to GDP since 2008. According to official data from the Ministry of Finance, in 2022 budget revenues reached 26.8% of GDP in lower level than in 2008 where the indicator was 28.9% of GDP.

IMF experts reveal that developing countries, including Albania, have the potential to increase their tax ratios to GDP by up to 9 percentage points through tax reform and strengthening of public institutions. The new tax-free space can provide our country with sufficient financial resources to achieve the objectives of sustainable development until 20230.

Harnessing this potential would also contribute to financial development and private sector entrepreneurship.

The average tax-to-GDP ratio in emerging markets has risen by about 3 to 5 percentage points since the early 1990s, driven largely by consumption taxes such as value added and excise taxes.

Furthermore, progress in income growth since the early 1990s has varied greatly across countries. Half of emerging market economies and two-thirds of low-income countries had a tax-to-GDP ratio in 2020 that was lower than 15 percent – ​​a tipping point above which growth is found to be accelerated.

The improvement of public institutions in the developing economies of which Albania is a part, including the reduction of corruption, would result in an additional increase of 5 percentage points of income in relation to GDP.

To build tax capacity, governments will need to implement comprehensive institutional reforms, which focus on domestic fiscal policy.

The IMF suggests as a fundamental intervention the improvement, design and administration of taxes such as VAT, excise duties, personal income taxes and corporate income taxes.

Also the implementation of bold reform plans in broadening the tax base through more neutral taxation of capital income and better use of property taxes would be a possibility.

Improving the institutions that run the tax system and manage tax reform is considered another key element. This requires adequate staff to predict and analyze the impact of tax policies on the economy, high professionalization of public officials working on the design and implementation of fiscal policy and better use of digital technologies further suggests the IMF study./ Monitor