"Fiscal Peace" without consultation with the EU, Brussels concerned

At the height of the electoral campaign, Prime Minister Edi Rama suddenly proposed to businesses the "Fiscal Peace" plan, which he described as "inspired by the principles of Ancient Rome."

"We have thought of a plan (…) used time and time again in different forms, a fiscal peace plan," Rama declared. 

But while the initiative was presented as a step towards calming relations between the state and business, it was not received with the same enthusiasm in Brussels. In an official response to Faktoje.al, the European Commission confirms that it was not asked about this proposal.

"The Commission is aware of the 'Fiscal Peace' proposal, made in the context of the electoral campaign. We have not been consulted by the Albanian authorities on this proposal," a European Commission spokesperson told Faktoje.al, adding how the initiative could affect Albania's accession process. 

"Within the framework of the EU accession process, this initiative will be discussed as part of the negotiations on the relevant chapters of the EU acquis," he concludes.

While in Albania there is talk of debt forgiveness, tax reviews and "clarity for businesses", in Brussels questions are being raised about the way this initiative was announced: without transparency, without consultation and at a delicate political moment. 

What does 'Fiscal Peace' entail?
According to the government, "Fiscal Peace" is a relief package that includes massive debt forgiveness and a review of tax obligations. The package is not part of the political program "Albania 2030", but the government argues that it will bring less stress to 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.

Albanian businesses owe the state 162.5 billion lek, or 1.6 billion euros, in unpaid taxes and customs duties. Value-added tax (VAT) and profit tax are the main taxes that businesses have not paid over the years. Official data shows that 84.7% of the debt is overdue for more than 2 years. Meanwhile, 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.
Economic and financial experts have harshly criticized the initiative, describing it as a wrong and dangerous signal. Former Tax Director, Artur Papajani, calls the massive debt write-off a punishment for businesses that have been correct over the years, while legal auditor Julian Saraçi goes further, describing it as a capitulation of the state in the face of tolerated informality. According to him, this is not an agreement, but an expiation of guilt for institutional failures in debt collection. Faktoje.al