Identifier
Created
Classification
Origin
08TIRANA187
2008-03-11 06:23:00
UNCLASSIFIED
Embassy Tirana
Cable title:  

REPORT ON ALBANIA'S FISCAL TRANSPARENCY

Tags:  EAID ECON PREL AL 
pdf how-to read a cable
VZCZCXYZ0000
PP RUEHWEB

DE RUEHTI #0187/01 0710623
ZNR UUUUU ZZH
P 110623Z MAR 08
FM AMEMBASSY TIRANA
TO SECSTATE WASHDC PRIORITY 6809
UNCLAS TIRANA 000187 

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/SCE (ERIN KOTHEIMER AND YOULIANA IVANOVA);
EEB/IFD/OMA (ANDREW SNOW AND RICHARD FIGUEROA)

PASS TO TREASURY FOR VIMAL ATUKORALA

REF: STATE 016737

E.O. 12958:N/A
TAGS: EAID ECON PREL AL
SUBJECT: REPORT ON ALBANIA'S FISCAL TRANSPARENCY

UNCLAS TIRANA 000187

SIPDIS

SIPDIS

DEPARTMENT FOR EUR/SCE (ERIN KOTHEIMER AND YOULIANA IVANOVA);
EEB/IFD/OMA (ANDREW SNOW AND RICHARD FIGUEROA)

PASS TO TREASURY FOR VIMAL ATUKORALA

REF: STATE 016737

E.O. 12958:N/A
TAGS: EAID ECON PREL AL
SUBJECT: REPORT ON ALBANIA'S FISCAL TRANSPARENCY


1. Per Reftel, post submits the following report for the
Department's congressionally-mandated report on fiscal transparency
in countries receiving USG assistance:


2. With continual prodding from the U.S., EU, and International
Financial Institutions, the Government of Albania (GOA) has taken
steps to improve its fiscal transparency and accountability. The
government's budget is made public and interested parties are
invited to make suggestions during the drafting period. However,
their comments are seldom reflected in the final budget. Upon
approval the budget is posted on the Finance Ministry's website and
subsequently published in the government's official gazette.


3. The budget includes, among other items, all planned revenues and
expenditures which do not always match the eventual end-of-the-year
fiscal results. In general, the accuracy of the figures remains
questionable, which is mainly due to the GOA's lack of capacity on
fiscal issues rather than a lack of will.


4. Financial data is closely scrutinized by the International
Monetary Fund's office in Albania. The IMF closely coordinates with
the Finance Ministry on the draft of the government's budget.
Albania has agreed to allow the IMF to report on the country's
compliance with standards of fiscal transparency. In July 2007, the
IMF completed the third review of Albania's economic performance and
financing assurances under the three-year Poverty Reduction and
Growth Facility (PRGF) arrangement and also the Extended Fund
Facility (EFF) arrangement. The IMF's fiscal monitoring of the GOA
is currently scheduled to expire in 2009.


5. The most important on-going USG project in Albania to improve
fiscal performance is the two-year Threshold Agreement approved by
the Millennium Challenge Corporation (MCC) in 2006. Albania's
Threshold Agreement is a USD 13.85 million assistance project to
reduce corruption and improve performance in three key areas of
public administration: tax administration, public procurement and
business registration. Two important components of the project deal

with the lack of transparency in tax collection and public access to
the GOA's Electronic Commercial Registry. (Note: A second two-year
Threshold Agreement is being negotiated now between the GOA and
MCC.) Separately, the EU is offering support to the Institute of
Statistics in Albania for data collection. The goal of this
initiative is to harmonize the Albanian statistical system with EU
standards.


6. Albania still suffers from a lack of consistency in its tax
legislation as well as a vague state of affairs in tax
administration and the implementation of fiscal laws. In 2008, the
GOA approved a controversial fiscal scheme that included different
reference prices for goods and profit levels for businesses in an
attempt to fight informality. The new law on tax fines (which
requires payment of the full tax assessed and 15 percent of the
fines imposed before an appeal can be made) has caused controversy
in the business community and is being appealed to the country's
Constitutional Court.


7. In 2007, Parliament approved new public procurement legislation
which aims to strengthen the independence and transparency of the
Public Procurement Agency and the appointment of a public
procurement ombudsman. However, legal enforcement of this and other
economic laws remains problematic. The establishment of a new joint
investigative unit to fight economic crime and corruption in the
Tirana Prosecutor's Office in May 2007 is a positive development.


8. The High Inspectorate for Declaration and Audit of Assets
(HIDAA) has made some progress on enforcing asset declaration
obligations. However, HIDAA lacks mechanisms to investigate
declarations. In general, there is good compliance with the legal
obligation to declare assets and private interests but no official
has yet been prosecuted for providing false information in an asset
declaration form.


9. There has been progress by the government in the area of Public
Internal Financial Control. In this respect an internal audit law
was recently approved by Parliament and proposals were made by the
government to introduce the concept of managerial accountability in
a new draft Organic Budget Law. Existing Internal Audit units
perform mainly control and inspection tasks, indicating that the
internal audit profession, which should focus on systems-assessment
and advice, is still in the very early stages of development.


10. As regards external audit capacities, neither the Constitution
nor the Law on External Audit complies fully with the guidelines of
the International Organization of Supreme Audit Institutions
(INTOSAI),especially regarding the functional and financial
independence of the Albanian supreme audit institute. The institute
needs to focus on financial and performance audits rather than on
inspection activities. Also the independence of the institute needs
to be appropriately strengthened. End Report.

WITHERS