SEEU Review vol. 6 Nr. 2 (pdf) - South East European University

SEEU Review Volume 6, No. 2, 2010PIT 4.41 5.42 4.77 4.83 4.16 4.03 4.18 6.49 8.52Other taxes 7.27 8.28 8.46 9.02 7.29 6.91 6.33 6.35 5.48Custom duties 13.01 11.01 10.38 9.53 8.37 7.40 6.81 4.29 3.23Property andlocal taxesSocialinsurancecontribution1.26 1.75 2.08 3.25 3.01 4.08 4.14 3.11 3.2619.26 19.37 19.88 19.92 20.06 19.69 19.13 18.40 18.46Source: Ministry of Finance AlbaniaAn important part of tax reform in Albania was introduction of flatincome tax in year 2007. From progressive income tax we moved to flat taxof about 10%, with a tax exclusion of the income below lek10,000. Theimpact of flat income tax in budget revenues is expected positively becausethe lost from the rate are gained from the tax base (see Evans and Aligica2008). Implementation of flat tax has had a positive impact in Albania, thetotal income generated from this tax in year 2008 has had a substantialincrease (more than double) relative to the period where the progressiveincome tax were applied. The main contribution of sustainable increase ofPIT, was caused by taxation of wages in private sector and implementationof reference wages for this sector in year 2007.Another important feature of tax reform in Albania has been the declineof corporate income tax. The decline of statutory corporate tax rate has beena feature of tax reform in many other transition economies, that have chooseto apply a low rate in a contest of fiscal policies that aim simplifying theirtax system in order to make their country more attractive to foreign investors(see Norregaard and Khan 2007). In Albania on 1 January 2008 the statutorycorporate tax rate decreased from 20% to 10%. For businesses operating inAlbania being or not a subject of this tax depend from their annual turnover,and not from juridical form of business organization. The impact ofreduction in statutory corporate tax rate in total tax revenue is according to(Griffith and Klemm 2004), is an empirical question, because of changes intax base, such as rate of incorporation. In Albania the contribution of this taxin total tax income has had a considerable decrease for year 2008 of about25.40% relative to the previous year.139