The European Union Delegation in Tirana expresses serious concerns about the effects of the “Fiscal Peace.” On the eve of the parliamentary vote on the initiative that paves the way for massive debt forgiveness and the review of tax obligations for businesses, the EU warns the government about its risks.

"The Commission highlighted serious concerns related to the discouragement of tax compliance and reiterated the need to put in place strong anti-money laundering measures within this proposal, while continuing its commitment to reducing the large number of tax exemptions," it told Faktoje.al, European Union Delegation Office.

For the EU, these concerns need to be addressed before the initiative can be considered sustainable in the context of European integration. The delegation stresses that any amnesty or voluntary tax compliance programme must be in line with international standards, without prejudice to the fight against organised crime.

"Albania should ensure that 'possible amnesties and voluntary tax compliance programs are in line with the country's plans, advance the fight against organized crime and are in line with the relevant EU acquis and international standards, such as those set by Moneyval and FATF," concludes the response of the EU Delegation Office in Tirana.

Initiative without EU consent

Brussels' stance a few hours before Parliament votes on "Fiscal Peace" also challenges the stance of the Minister of Finance, Petrit Malaj, who previously hinted that the initiative has been agreed upon with the International Monetary Fund and the European Union.

"In the spirit of transparency, this project has been consulted with the IMF, which agrees with this project and has not opposed the deletion and legalization. We have also consulted with the European Union," Malaj stated during the E Zone show on Vizion Plus.

The statement contradicts the Delegation's official information, according to which the EU's concerns remain unresolved. The initiative, they say, is not fully compliant with European standards for fiscal administration and the fight against money laundering.

Contrary to what the minister claims, the government has not consulted with Brussels about “Fiscal Peace.” In June of this year, in a response to Faktoje.al, the European Commission warned the government that the initiative could affect Albania's membership process.

"We have not been consulted by the Albanian authorities on this proposal," a European Commission spokesperson told Faktoje.al at the time.

Even the International Monetary Fund has spoken out against the initiative. During a recent official visit, alongside the minister, the head of the International Monetary Fund mission, Anke Weber, said that “we are concerned that some of the elements of the proposal could undermine Albania’s recent progress in tax administration and create some risks to fiscal compliance and fairness.”

"Money laundering machine"

The "Fiscal Peace" plan has been strongly opposed by the opposition. Democratic MP Jorida Tabaku has addressed the risks of the initiative to the Commission and the European Parliament.

"This amnesty opens doors for money laundering, weakens economic security and undermines the trust that international investors should have in Albania. My position is clear – no concessions to informality," argues Tabaku.

According to her, "Fiscal Peace" is a state laundry machine for laundering the proceeds of crime and corruption, rewarding fraudsters and tax evaders, while increasing the burden on honest businesses and citizens who pay taxes every day.

The American Chamber of Commerce has also expressed opposition. American businesses have criticized the government for the lack of public consultation and the lack of transparency regarding the two bills, which are expected to forgive businesses billions of euros in fees, fines, and late payment interest.

On the other hand, economic and financial experts have described the initiative as a wrong and dangerous signal.

Former Tax Director, Artur Papajani, calls the massive debt write-off a punishment for businesses that have been correct over the years.

While legal auditor Julian Saraçi goes further, describing it as a capitulation of the state in the face of tolerated informality. According to him, this is not an agreement, but an absolution for institutional failures in debt collection.

What does “Fiscal Peace” provide?

The government says that "Fiscal Peace" is a relief package that includes massive debt forgiveness and a review of tax obligations.

The three main pillars of Fiscal Peace:

Agreed Tax on Profit

Review of Financial Statements

Forgiveness of Obligations and Interest on Late Payments

The initiative foresees the full cancellation of tax debts older than 10 years, if they are still outstanding. For obligations from 5-10 years, a 50% cancellation of the debt is foreseen, if the business pays it immediately. Meanwhile, businesses that do not have the possibility of immediate repayment, there will be a 12-month agreement and the forgiveness will be at the rate of 25%. Social security obligations are not included here.

The package also proposes the review of previous income tax returns.

Businesses are given the right to review tax returns for the last 5 years without penalties or late payment interest (current legislation allows for 3 years) but by paying a 5% profit tax for any profit difference created by the review.

Albanian businesses owe the state 162.5 billion lek, or 1.6 billion euros, in unpaid taxes and customs duties. Value-added tax (VAT) and profit tax are the main taxes that businesses have not paid over the years. Official data shows that 84.7% of the debt is overdue for more than 2 years. Meanwhile, liabilities overdue for more than 5 years account for 64.4% of the total.

cONcluSiON

The “Fiscal Peace” plan was suddenly presented at the height of the electoral campaign by Prime Minister Edi Rama, who sought Albanian votes with the promise of a “European passport”. But the initiative conflicts with Brussels’ demands. A few hours before the vote in Parliament, the European Union raised strong concerns about the initiative, which also refuted the statements of the Minister of Finance, Petrit Malaj, who claimed that the “Fiscal Peace” had the agreement of the EU.

The European Commission warns that the initiative risks discouraging tax compliance and could create spaces for money laundering, circumventing international standards of Moneyval and FATF. The EU delegation confirmed to Faktoje.al that concerns still remain open and that the initiative must be aligned with the EU acquis before it can be considered acceptable within the framework of integration.

The International Monetary Fund also spoke out against the initiative. During a recent official visit, alongside Minister Malaj, the head of the International Monetary Fund mission, Anke Weber, said that “some of the elements of the proposal could undermine Albania’s recent progress in tax administration and create some risks to fiscal compliance and fairness.”

Therefore, based on this information, we categorize the statement of Finance Minister Petrit Malaj as false. /Faktoje.al/

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