Identifier
Created
Classification
Origin
08TIRANA424
2008-06-06 16:16:00
UNCLASSIFIED
Embassy Tirana
Cable title:  

GOA SIMPLIFIES TAX PAYMENT PROCEUDRES

Tags:  EAID ECON PGOV AL 
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RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHTI #0424 1581616
ZNR UUUUU ZZH
P 061616Z JUN 08
FM AMEMBASSY TIRANA
TO RUEHC/SECSTATE WASHDC PRIORITY 7148
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
UNCLAS TIRANA 000424 

SIPDIS

DEPARTMENT FOR EUR/SCE (ERIN KOTHEIMER)
PASS TO USAID/ODP/MCC (PETER DELP)
PASS TO TREASURY (VIMAL ATUKORALA)

E.O. 12958:N/A
TAGS: EAID ECON PGOV AL
SUBJECT: GOA SIMPLIFIES TAX PAYMENT PROCEUDRES

UNCLAS TIRANA 000424

SIPDIS

DEPARTMENT FOR EUR/SCE (ERIN KOTHEIMER)
PASS TO USAID/ODP/MCC (PETER DELP)
PASS TO TREASURY (VIMAL ATUKORALA)

E.O. 12958:N/A
TAGS: EAID ECON PGOV AL
SUBJECT: GOA SIMPLIFIES TAX PAYMENT PROCEUDRES


1. On May 12, the Finance Ministry eliminated the rule requiring
taxpayers to bring in their accounting records to government tax
offices for "verification" every month. Whatever the original
intent of this "verification" rule, it was not used as an audit
mechanism, as the General Directorate of Taxation (GDT) sometimes
pretended. It was mostly a bribery opportunity for corrupt
inspectors and a headache for taxpayers. The Finance Ministry,
which clung to the rule despite business protests, finally scrapped
the requirement in favor of a system of selective audit. This rule
change also anticipates the soon-to-be-enacted tax procedures law,
which creates a modern audit unit in the GDT, which will select
taxpayers for audit based on an objective risk analysis formula --
the international norm and standard for tax auditing.

2. "Verification" was also a hindrance to the tax e-filing system
created by the Millennium Challenge Account (MCA) Threshold Program
designed to simplify tax procedures, reduce corruption and create a
friendlier investment climate. The old rule was at odds with the
new e-filing system and diluted the benefits of submitting online
declarations directly to the tax office, without the
"intermediation" of tax officials. "Verification" also deterred
business taxpayers from e-filing in larger numbers since taxpayers
still had to present their records every month and "negotiate"
payment during verification. The result was low usage of the
e-filing system, despite small incremental monthly increases.

3. With this onerous step gone, there should be an increase in
e-filing. In April, there were 200 taxpayer e-filers. In May, tax
authorities at GDT are expect nearly 1,000. Whether there will be a
corresponding reduction in tax-related corruption remains to be
seen. For the new e-filing system to be successful, it must become
widely utilized by the public and business community. To date, the
tax authorities have been reluctant to publicize the new payment
procedures. Post is reaching out to the American Chamber of
Commerce and other business associations to spread the word to the
business community.

4. Comment: Albania was again taken to the woodshed by the World
Bank in its most recent Doing Business survey where it ranked 136
out of 178 countries for ease of conducting business. The ranking
was almost exactly the same as Albania's placement last year. The
new e-filing system should help improve Albania's ranking next year
in the tax paying criteria where it ranked 117 and did poorly in
part on the basis of the amount of time required to pay taxes. The
World Bank survey also relied on data gathered before the
introduction of new "one-stop-shop" business registration procedures
last fall and the passage by Parliament of Albania's first
bankruptcy law this week. Albania ranked 123 and dead last,
respectively, under rankings for starting a business (focusing in
large measure on the number of days required to open a business) and
closing a business. Despite these improvements, however, Albania is
still plagued by a reputation as a risky place for foreign
investment, largely due to corruption and lack of infrastructure.
End Comment.
WITHERS