IMF Urges Albania to Raise Taxes and Pension Age
In a report issued on Wednesday, following discussing between the Albanian government and the Fund from October to December, the IMF said Albania’s economy had weakened and macro-economic imbalances had widened.
“Public debt and financing needs - among the highest regionally - have risen because of fiscal loosening, particularly in the first half of 2013 and the sluggish economy,” the IMF noted.
“High non-performing loans (NPLs) are constraining credit growth, and weak external drivers are preventing a sustained reduction in external imbalances,” it added.
The Fund says that in order to lower the public debt ratio in 2015 and reduce it to below 60 per cent in the medium term, Albania needs to undertake significant further tax and expenditure reforms to tackle the high deficit.
Among possible measures suggested by the IMF are a number of tax hikes and excise duties, an annual vehicle license fee, a reduction in electricity theft and raising the retirement age to 65 for women and 67 for men. Currently, women retire at 60 and men at 65.
Other possible measure suggested by the IMF include taxes on luxury goods, such as jewelry and luxury cars, a flat tax on residents travelling abroad, an increase in the annual fees on used vehicles by 50 per cent, a levy a tax of 7.5 per cent on businesses with turnover between lek 2-8 million, a rise in fuel prices at the pump by about 6.5 per cent and doubling property tax for commercial purposes.
“Ambitious reforms, including in the areas of pensions, energy, local government, public administration and the business environment, are essential to support medium-term growth and debt sustainability,” the IMF underlined.