IMF-Albania: Realistic budget. increase flat tax!

23. June 2011. | 12:05

Source: Alsat

The government should show realistic and careful attitudes while compiling budgets, because during the last years, there have been revisions and provision of additional funds in the middle of the year.

The government should show realistic and careful attitudes while compiling budgets, because during the last years, there have been revisions and provision of additional funds in the middle of the year.

This advice was given at the end of the last mission of the International Monetary Fund (IMF) in Tirana. Within few days the government is expected to declare a budgetary revision of Lek 20 billion.

“Our recommendation for this year is to cut budgetary expenses with the amount of Lek 20 billion. Having budgetary cuts at the middle of the year is not an ideal situation. Budgets should be more realist and they should not be changed in the middle of the year. In the last years, budgets have been based on optimistic income, which in many cases has not been realized and which brought obligatory cuts in expenses,” said the head of the IMF mission, Gerwin Bell.

Meanwhile, Albanian Finance Minister Ridvan Bode shared a different opinion. According to him, the budgetary revisions are a worthy and necessary practice.

“There will be annual revisions and they are good and transparent practices, even those that revise the budget in the middle of the year. For some years, these revisions required additions, and during the last two years, there were budget cuts,” said Bode.

Another recommendation in this difficult economic period was that of the increase in the level of taxes, but even this request from the IMF was rejected by the Finance Minister.

“The decrease of payment for social security did not bring the results we expected. It would be better to increase the flat tax in more than 10%. This change does not affect foreign investments. Even if it reaches a level of 12 or 15%, it would again be a low level. There is also need to work with the value added tax (VAT) scheme and the return of this tax to the businesses,” said Bell.

“We consider it possible to carry the necessary budgetary actions within the actual fiscal frame. This means, that there is no need to increase taxes. It is indispensable to revise the practices for some taxes, not the major ones, in order for them to be easily collected,” said Bode.

The head of IMF mission evaluated the achievements and developments of Albania in this period of crisis, but he insisted in decreasing the public debt from 60% to 50% within the next 5 years. Bode and Bell share different opinions even about the economic increase for this year.

The government’s prediction is 5%, meanwhile the IMF expert says 2.7%. He argued this declaration by saying that IMF gives the most pessimistic figure.