Law. Fiscal.

Accountability

www.al-tax.org altax@consultant.com

MODERN ALBANIAN TAX ADMINISTRATION

By AL-Tax

reflecting the administration as a service already provided on frameworks defined according to the principles of the new political system. In 1999 a more complete law structured in the context of contemporary laws passed in countries in political and economic transition was adopted. Law No.8560, date 22.12.1999 made a clear distinction in the administration model by clearly specifying the mission of tax administration, reflecting its structural changes covering the tasks that other institutions had, and strengthening the rights of taxpayers and services that they benefit. For the first time tax administration was divided between central and local administration. Drafting and approval of the current law on tax administration Nr. 9920; dated 19.05.2008 placed the tax administration in the position of a modern administration aligning it with the new geo-political changes in the country towards European integration. This law clearly reflects that tax administration passes through taxpayer service and a cooperative relationship with the institutions and all stakeholders who have interests in a growing stewardship. The law is based on the charter of the taxpayers rights and a complete clarity on universal principles of modern tax administration. Besides the tax authority, with decree Nr.7463 dated 31.01.1991 Financial Police was established as the armed executive body specialized for the control of fiscal legislation enforcement by private and public sector and by domestic or international physical and legal entities or based outside the territory of Albania and exercising economic activity in its territory.

The first years

The first approach about drafting and founding of the actually tax system in Albania begin since 1991 and with a group of tax laws they constitute the first fiscal package in the year 19921. Administration of taxes in the Republic of Albania, according to law Nr.7546, dated 06.01.1992 started to be made by tax authorities. Tax authorities under this law were the Tax Directorate in the Ministry of Finance and its branches in 36 district centers. The tax authorities were charged with the task of performing all acts related to the registration of subjects, maintenance of appropriate documentation, issuing tax acts according to the declaration and other data submitted by entities and determining the tax base and size. Tax Administration extended to include all categories of activities, without exception. Conventions and agreements signed between the Republic of Albania and other countries to avoid double taxation had priority in relation to tax legislation. The main taxes in 1992 included national and local taxes, tax on turnover, excise tax and profit taxi. Tax administration was strengthened with clearer rights and responsibilities as well as elements that were in line with administration development through Law Nr.7681, dated 04.03.1993. This law defined rights and duties of tax administration

Law. Fiscal. Accountability

www.al-tax.org altax@consultant.com

The financial police had the task to control the accuracy of financial statements, check the implementation of rules for weight, standards, prices, quality tariffs for goods, control illegal activities, control the enforcement of state monopoly and control the enforcement of provisions in the field of customs duties. In 1995, the Law Nr.7938, dated 24.05.1995, dissolved the financial police and served as the basis for the creation of two specialized bodies named: (a) Customs Police, under the Director General of Customs and (b) Tax Police under the Director of Taxes. The appointment and dismissal of the head of police for the two bodies was in the powers of the Minister of Finance. With the approval of the customs code and tax procedures law in 2008 these bodies were dissolved and integrated in other tasks of intelligence and field verification within the respective central administrations of customs and taxes. General Directors who run the tax administration in the years 1994-2011 exist since the first law of tax administration was adopted in 1992 together with the fiscal package. For the first time in 1995 the terms Director General of Taxes and General Tax Directorate were introduced in the law.

Tax Administration is the only authority that accepts tax declarations for national taxes and duties, including declarations for social and health insurance contributions; it assesses tax obligations, accuracy of the declarations and, on this basis, determines the additional tax liability of a taxpayer and the refund or return of overpaid taxes. Built on pillars of procedures and rules through functional organization, administration of tax liabilities in recent years has attempted to come closer to the principles of good administration and in response to taxpayers requests. Since the tax systems primary function is to generate revenue, the first administration goal is closely related to this function in order to operate effectively. In this regard the improvement of the administration has followed the function by adapting the organizational structure, method of tax collection, initially starting administration with the calculation of tax size in a legal manner and reaching as far as the assessment of tax calculated by taxpayers effectively and without harming the system. In this regard another administration goal was to increase the economic efficiency of the tax system. Over the years, the tax administration is less intrusive to business decision making regarding problems going beyond the constructed model. Businesses and individuals have developed activities independently and unprovoked by administrative decisions. Pursuing this goal, another goal which has strengthened over the years, has been the shifting of the tax burden through its distribution according to the place and subject where it is created. For this purpose by structuring tax administration both

Administration model
Tax policy and tax administration can be considered as a combination of two parts which complete the whole. The combination of a good tax and a good administration gives us a basis for evaluating the way taxes re oriented. After 19 years, the tax administration as a central institution is the only central tax authority in the Republic of Albania.

Law. Fiscal. Accountability

www.al-tax.org altax@consultant.com

horizontally and vertically, it was possible through decentralization to have a fairer separation of powers involved in administration by strengthening the interaction between them and adjusting tax levels according to geographic and economic areas. The introduction of individual income declaration in 2011 came as a result of increased administrative capacities capable of managing this administration development process. Tax policies pursued by a growing administration, as will be illustrated with statistical information in this document will serve to further maintain the level of administration according to the principles of good management.

In the same comparison format revenue collected by tax administration towards total budget revenue one can observe a difference of 2.6 higher for revenue collected by tax administration. The share of revenue from taxes and customs for the last 5-years had a weight increase towards GDP by 2.2 percentage points compared to the previous 5-years reaching 18.2% of GDP. If you look at the respective 5year ratios (or more) of revenues collected from tax administrations, customs, local government, social and health contributions fund and grants towards total budget revenues, we see that over 2/3 of total budget revenues are composed of revenue from the two central administrations, tax administration and Custom. 2012

Tax ratios
If compared public expenditures between 1994 and 2011 and revenues between 2011 and 1994 there is in a revenue increase of 1.2 times higher in relation to costs, which is indicative of a positive budgetary performance. In this regard the weight of each category of income in relation to public spending reflects a consistency index of income growth, whether we can distinguish the share of revenues collected by Albanian tax administration in 2011 (not including social insurances contributions) with 30.7 percent coverage level of total public expenditure. The weight of other revenue If compared the GDP for 2011 with 1994 in the same projection for revenue collected by tax administration you can see a 3 times higher level for tax revenue to GDP. Tax administration to GDP used to be 9.1% and it is 13% in 2011 with a positive difference of 3.9% of continuous weight increase for revenue collected by tax administration.

Law No.7543, date 24.12.1991 On Turnover Tax, issued by Decree No.106, date 06.01.1992 Law Nr.7544, date 06.01.1992 On Profit Tax. Law No.7545, date 06.01.1992 On income tax on physical persons in private sectors of commerce, artifacts, and other services Law No.7546, date 06.01.1992 On administration of taxes in the Republic of Albania. Law No.7547, date 06.01.1992 On excise tax in the Republic of Albania. Law No.7585, date 14.07.1992 On personal income taxes.