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Fiscal reform and change of the status quo: How and Why?

by Eduart GJOKUTAJ

The tax administration remains a lot of work for the future to clarify gaps in tax policy. Fiscal reforms undertaken so far have managed to meet with hardships to achieve budget stability until two years ago. The challenge of the development of country standards, which coincides with the challenge of achieving fiscal and administrative standards of the European Union (administration of standard stability). But it will be treated as a product derived from the enhanced quality of service and not the opposite. In the optics of policy, fiscal management reform is part of that system to be built on a new model introduced in general by the new majority. In analogy with us, fiscal policies in neighboring countries have advanced further. Fiscal policy in these countries is evolving towards a new model of taxation, which harmonizes taxes on consumption with a broad base of taxpayers (VAT / sales tax on several tax rates), with progressive tax rates on the value of labor and the adjusted tax rate instead of a flat tax on capital value.

On the one hand, the model fits in relation to the involvement of the local economy in the global economy and financial markets, and on the other hand takes into consideration the inability of tax administrators to develop in line with these developments. The experience of countries that have achieved high standards of administration tells us that the model should be built by copying the management practices of countries that have success stories. Especially to suit the organizational models of successful private companies. Such companies are already legends in the United States, Great Britain, France, Germany, China, and Japan. They have a history of success based over all i n the building of columns of the internal governance management.

Tax administration should pursue 'projects' ready, starting with (1) the building of the self-estimation systems; (2) promoting the implementation of the tasks and duties without objections from taxpayers; (3) introduction of management based on risk management ranking; (4) promoting basic values of equality and fairness; (5) specialization in order improve their skills (6) the provision of services by the taxpayer segmentation, which responds to the needs of different levels according to customer categories.

The impact of political bid to budget revenues. Why, how? As Kautilya (Indian philosopher) describes Taxation should not be a painful process for the people. There should be lenient and caution while deciding the tax structure. Ideally, governments should collect taxes like a honeybee, which sucks just the right amount of honey from the flower so that both can survive. Taxes should be collected in small and not in large proportions

Noted that fiscal policy proposals aimed at realization of neutral revenues. However, any change in the tax rate has a significant effect on the income distribution by social classes. In this context, changes as in the above steps have different effects on income distribution in Albanian families. When introduced new laws to implement should be communicated in advance by political bidder the social policy and budget bill.

The latest political offer about tax rate discounts (removal) was introduced in 'market' policy targeting expansion of the tax base (increased enrollment and shrinking informal market). But, also trying to make a direct social policy for the vulnerable segments of individuals employed or employee family members. Such a policy, somehow gives a help in the fight against tax evasion and 'liberation' the territory of informality.

How about the cost of budget from political offers?

It is estimated (AL-Tax Center calculation) that the effect of all the new political majority promises about new tax cuts and removal will cost for the 2014 budget in a very near of

100 million US.D. In this context included as taxes related to business with a turnover under 5 million (2.5 billion ALL), as well as the value added tax on the trading of pharmaceuticals industry and health services (2.5 billion ALL), reduction of value added tax on energy for family (3 billion ALL), the halving of the value added tax on basic food (1.1 billion ALL), excise related agricultural-livestock sector (1.2 billion ALL), as well as effects from the limited exceptions in imports (300 million ALL). In this calculation does not include the effect of the removal of references to customs import bills.

Reduction or abolition of tax rates should consider and economic environment on which the current fiscal system applies. So, in this environment has different segments and groups of taxpayers who benefit or bear a higher burden in relation to each other. This disparity within the same tax was created by the combination of fiscal policy for economic policy, interference from certain political factions clientele, as well as interventions of powerful business and finance groups.

As a reflection, in the context of the adoption of the new Law on VAT entrepreneurs and policy considerations should include, as those businesses that are VAT base, as well as part of the business that are exempt from VAT and is specifically addressing agrarian sector and financial services, but without forgetting the excepted services until now, education sector, the media sector and various exceptions related to specific management schemes.

However, fiscal reform and the new model may spend all difficulties. To overcome these difficulties I think, politics and administration should be directed to:

taxes; -

the distribution of the tax burden fairly, especially balancing direct and indirect

analysis of different forms of informal economy (i.e. unregistered economic activities) and support the self-employed and micro businesses;

stabilization of the legal framework and improving the transparency of the tax system;

Increase the capability and capacity of tax administrations in collecting and reporting costs.

The challenge of the new tax system in Albania for the future is to create an efficient fiscal administration by applying modern administrative norms.