Fiscal peace or electoral coup?! Businesses owe 1.6 billion euros to the state

On the eve of the elections, the government proposed to businesses “Fiscal Peace” – a package that includes massive debt forgiveness and a review of tax obligations. Albanian businesses owe the state 1.6 billion euros. For experts, this is another electoral ploy that undermines fiscal justice and encourages informality.

In a meeting with businesses from Elbasan at the height of the election campaign, Prime Minister Edi Rama unexpectedly presented a new initiative: "Fiscal Peace", a relief package that includes massive debt forgiveness and a review of tax obligations.

“A fiscal peace plan, inspired by the principles of Ancient Rome,” Rama described this move a few weeks before the elections. “We have thought of a plan (…) used time and time again in different forms, a fiscal peace plan,” he further declared. 

The package is not part of the "Albania 2030" political program, but the government argues that it will bring less stress for businesses, fewer controls, and more clarity.

The three main pillars of Fiscal Peace:

Agreed Tax on Profit
Review of Financial Statements
Forgiveness of Liabilities and Interest on Late Payments
The initiative provides for the full cancellation of tax debts older than 10 years, if they are still outstanding. For liabilities from 5-10 years, a 50% cancellation of the debt is foreseen, if the business pays it immediately. While businesses that do not have the possibility of immediate repayment, there will be a 12-month agreement and the forgiveness will be at the rate of 25%. Social security liabilities are not included here. 

The package also proposes the revision of previous income tax returns.
Businesses are given the right to revise their tax returns for the last 5 years without penalties or interest (current legislation allows for 3 years) but by paying a 5% profit tax for any profit difference created by the revision.

How much debt do businesses have to the state? 
Albanian businesses owe the state 162.5 billion lek, or 1.6 billion euros, in unpaid taxes and customs debts. 

Value Added Tax (VAT) and corporate income tax are the main taxes that businesses have not paid over the years. Official data shows that 84.7% of debt is overdue for more than 2 years. While liabilities overdue for more than 5 years account for 64.4% of the total. 

84.7% of this debt is older than 2 years.
64.4% belongs to the period over 5 years.
Over the last decade, the stock of business debt has increased year after year, with the only exception being 2017. 

Former tax director Artur Papajani says that debt cancellation is not a privilege, but a punishment. 

"The massive cancellation of tax debts is not a privilege for debtors! It is a punishment and a discouragement for thousands of taxpayers who have always been correct in their tax compliance," Papajani argues for Faktoje.al.

Meanwhile, legal auditor Julian Saraçi describes the initiative as the state's capitulation in the face of informality.

"Fiscal peace is a repeated act of surrender to the informality that has been tolerated for years. This initiative is not an agreement, it is capitulation."

If businesses have outstanding debts for more than 10 years, this means that the administration has failed to collect this debt on time - emphasizes Saraçi. 

"So, we don't just have an apology, but also an institutional expiation. Therefore, I think that more than peace, an in-depth investigation should be conducted into why this debt was created and prescribed and why measures were not taken to collect it."

The debt of businesses to the state would be even greater, but governments have occasionally approved fiscal amnesties, forgiving billions of lek in debts of entrepreneurs in the country. 

Fiscal measures on the eve of elections 
This is not the first case of debt forgiveness in the pre-election period. Since 2009, at least 6 amnesty measures have been taken, which coincide with local or parliamentary elections. 

In 2009, as Albanians were about to head to the ballot boxes for the general parliamentary elections, the government of the time proposed the legalization of undeclared capital. In the years 2011-2014, old fines and obligations were forgiven, to be followed later in 2019 with the forgiveness of energy debts. Also, in the years 2023-2024, the government revived the draft law on fiscal amnesty despite the fact that all international institutions such as the IMF, the World Bank and the European Union were against it.

"This pattern is not a coincidence, but a repeated electoral strategy, where the state uses fiscal policy as a tool to buy tolerance instead of building fiscal discipline" - ALTAX

Experts from the ALTAX center argue that this model must be stopped urgently as the consequences will be severe. 

"Informality will increase because taxpayers will tend not to pay in the hope of another 'forgiveness'. Fiscal equality will also be damaged, because the state of the 'forgiven' can never be just, and clientelism will be strengthened because fiscal forgiveness is always happening at the ballot box" - ALTAX

Is this peace, or simply a pre-election stunt that promotes injustice and harms honest entrepreneurs? This is the question that arises today, as the law is softened during the campaign. Faktoje.al