For an efficient reform against informality

The Secretariat of the Albania Investment Council, organized on November 25th, 2015, a preliminary consultation regarding recommendations that will be submitted in the next IC meeting of December 15^th, concerning the action against informality.

Representatives from different organisations took part in this meeting, such as representatives from the Chamber of Commerce and Industry of Tirana, Union of Chambers of Commerce, American Chamber of Commerce, Italian Chamber, German Chamber (DIHA), Turkish Chamber, FIAA, Bankers Association, and also representatives from the tourism sector as well as organisations from the sector of agriculture and agro-industry.

After the presentation of the preliminary findings from the analysis and the Survey carried out by the Secretariat, discussions were opened to all the participants. Some of the main messages were:

“The Businesses appreciate the measures taken against informality but there is a high concern regarding the harsh penalties, amendments of the legislation without prior consultation with the business community. in addition, in order for the reform against informality to become effective, it was emphasized as well the need for prior reforms in the fiscal administration.”

“Furthermore, it was highlighted that the crediting remains low from the banking system. In the meantime, the business considers that the Value-Added Tax (VAT), simplification of the tax legislation and professionalism of the tax administration, are some of the most important preliminary factors for a successful reform.”

A focused discussion was made regarding informality in the agriculture sector, and more specifically in the dairy subsector. The discussion was based also in the material presented for this subsector. It was suggested that in the fight against informality, should be considered problems starting with:

1. The electronic card of the farmer
2. Registration of the livestock and integration of the database
3. The need for a special centre for the registration of the farmer to be reflected also in the categorization of NRC
4. The subsidy scheme is not incentive for formalization as it affects only a very limited category of farmers. VAT should be revised as the reimbursement of VAT should be incentivizing
5. To consider the problem of capacities as well as the functions of the Regulatory Institutions for the food production chain.

During the meeting, it was concluded that the private sector supports the need to fight informality, while it has continually demanded intervention to regulate markets, promote fair competition and productivity in the economy. It was agreed to collaborate with the Secretariat of the Investment Council to share common concerns and make concrete proposals to the Government for the formalization.

In addition, business representatives suggested some common recommendations to be submitted in the next meeting of the Investment Council:

• The Government action against informality should be structured as a formalization reform spread in time, with a well-articulated plan of measures, with targets and deadline already made known to the public;
• This reform should be preceded by analyses and sectoral/fiscal approaches for the formalization of the economy. The contribution of the business associations remains indispensable for the success of this strategic reform for the economy of the country;
• The success of this reform depends to a considerate extent also by the level of communication and professionalism of the tax administration.
• It is required a closer collaboration with the Government and a wider consultation with the business and stakeholders in the conceptualizing of the initiatives and reforms, with a well-defined process which will necessarily include a preliminary assessment of the impact of any legislation and reform amendment;
• A further simplification of the legislation and procedures to offer facilitation in the formalization; facilitation of the administrative burden for the private sector;
• Public institutions (central and local) to specify their regulatory functions, as well as coordinate and exchange accurate information in order to assist the private sector;
• To help small taxpayers, especially in agriculture, for a specific time in order to become “compliant” with taxes and not fight or fine them or even send them to prison. Agriculture, with its own subsectors, constitutes a deeper and gradual approach, for the social impact and complexity of the value chain.

Business representatives present in this meeting, considered this initiative as an opportunity to tackle and highlight tangible problems of the private entrepreneurship in the country but also suggest concrete actions for a successful partnership with the government.

The Council is a platform set up by the Albanian authorities with the support from the EBRD to intensify the dialogue between the government and the private sector, improve the business climate and promote good governance. The work of the Council is supported by a Secretariat, an independent body of professionals selected and contracted by the EBRD to directly engage with the business community. The initial funding for the Secretariat is provided by Italy.