Fiscal incentives and empowerment of small business under 2022 state budget

Prime Minister Edi Rama today held meeting with small business representatives as part of a series of consultations on the state budget bill for 2022:


Good evening everyone! I wish that these raindrops are an auspicious harbinger of your success and prosperity and I am very glad that as we discuss the next year’s state budget it all begins with the fact that we are now consolidating an already well-established position of the small business, by maintaining a zero profit tax policy on all small businesses and zero VAT rate on businesses with annual turnover of up to 100 million lek.

I would like to present a figure or a set of data, starting with a very significant and meaningful one, in my view, for you to create a clearer picture of the current situation compared to the situation we inherited upon embarking on this effort shortly after taking office.

A total of 60,000 businesses operated back then and a 10% flat tax was imposed on them, whereas a total of 110,000 small businesses operate today and a zero tax rate is applied to them. This is primarily to tell all of those who keep claiming over alleged small business closure, bankruptcy and destruction, and to all of those who fall prey to this propaganda, because, as the facts and figures show, small business is definitely the one benefiting most from our government support.

Another significant figure is that although a relatively low number of only 60,000 registered small businesses operated between 2006 and 2013, they have paid 19 billion in taxes, whereas over 110,000 businesses have paid only 5.7 billion lek in taxes from 2014 to 2021, or three times less, meaning the difference has ended up in the households economy of these small entrepreneurs and it is about a significant difference of around $133 million.

Further on, the most recent data show that the small business segment has swiftly recovered following the dramatic lockdown due to the pandemic, a 2400 more businesses than in the pre-pandemic period were recorded in October this year.

There has certainly been a number of businesses that have had to shut down their activity as this is the normality of the system we have chosen, but there is also a much higher number of new businesses that have started their activity and the most recent data show a total of 2400 more small businesses than in the pre-pandemic period.

We definitely believe that the government’s relief package to help small businesses to cope with the blow from the pandemic has had a crucial role, removing the noose around their neck and helping them to overcome and recover from that terrible crisis and saving them from the clutches of bankruptcy.

Another important fact is that business has now ushered in a totally new era, namely the fiscalization reform. Around 67% of small businesses have now obtained an e-certificate and 32% of the small businesses now issue fiscalized invoices.

Such a reform is incredibly important to the state, small business and all of those who are interested in more capital spending, in more investments, more schools, kindergartens, nurseries, new roads, modern health care system and so on and so forth, because the reform is not translated into fiscal pressure on business. Small businesses with an annual turnover up to 100 million lek practically pay nothing in taxes and they are excluded from having to pay VAT, but with the transactions digitized big businesses will no longer be provided the opportunity to take advantage of small businesses to commit tax evasion and hide their transactions and big businesses will no longer be able to go on with their informal activities and their taxes will be channelled to the state coffers.

In the meantime, it is very important that not only the state budget is ready to commit more funds to tackle the needs of vulnerable social categories and communities, but also eventually be relieved and liberated from the continued inspections and checks and arbitrariness of inspectors.

I am here together with the Finance Minister, who has assumed this position after heading the Tax Administration, where she has left the best impression for her moral and professional integrity. In the meantime, the newly-appointed Director of the Tax Administration has also a very precious experience, but the two are part of this effort and endeavour in this front to ensure a huge leap and transition towards taking the whole taxation system to a whole new level, by ultimately removing the inspectors’ and tax administration officers’ hand from the throat of any businesses.

The ongoing digital revolution is crucial to this effort, because everything would become detectable and readable in real time and everything would be processed by the computer system that will replace inspectors and the businessmen, and whoever does business according to the rules will see nobody knocking on their door.

The system will work through an artificial intelligent brain, which based on risk and real-time projections, provides data and signals to let the state, the tax and customs administrations of potential suspicious transactions. Whole system will be controlled this way.

I know quite well that in addition to hard work, efforts and positive outcomes thanks to the work by the Taxation Directorate and the previous Finance Minister, and her successor and despite good will and readiness by the largest part of the taxation administration personnel, a number of them have caused entrepreneurs to feel stressed.

It is our objective to ultimately relieve them from this stress, while the Finance Minister and the Director of the Tax Administration have recently drafted a new strategy and approach to business during this intermediate stage, as we still have to complete the fiscalization framework and therefore we will have to operate through inspectors on the ground for some time, but by paralyzing tax investigation from levelling fines on behalf of the state, but indeed, and I am convinced that many of you could have been eyewitnesses of fines imposed on behalf of the inspectors’ pockets, and by most effectively pressing ahead with the fiscalization reform together with the internal restructuring of the tax administration and inspection service as a completely different process.

The process has taken time, it has taken efforts and hard work, it has taken moral cost and psychological cost, and time cost for you all, but everything takes its time.

The Finance Minister dwelled upon a number of programs and I am not going to repeat them, but I would like to put emphasis on the new volume of financial support for the younger entrepreneurs who are seeking to launch a small business and have innovative ideas, specifically about start-ups.

It is not only part of the state budget, but also our readiness to support introduction of innovation and technology as much as possible, and encourage young people to actively engage in this new wave of human development, with facts speaking for themselves through the young people in villages and cities throughout Albania, who are increasingly taking up virtual freelancing, digital platform-linked jobs for leading companies all over the world without having to walk out of their own houses. Of course, thanks to their talent, thanks to their ambition, willingness and dedication, they have succeeded in taking such jobs thanks to their personal merit, while we are seeking to encourage them as much as possible by providing financial support for their education and help them to launch their businesses through technology.

Two important measures included in the new fiscal package with an impact also on the small business are: first, increase of the minimum monthly wage to 320,000 lek, while our ambition is that the minimum wage grows to 400,000 lek by end of this term in office. To this end, we are working on a cooperation scheme with business and it is still too early to elaborate on such a scheme we are working on, but we plan to connect small business, and probably the big business community, with the economic assistance system, and build an alliance with business to employ individuals currently benefiting economic assistance by transferring their salary as part of the economic assistance payment.

So, if the minimum monthly salary is 320,000 lek, the government will pay a good part of this amount to the individuals benefiting economic assistance, but who are physically and healthy fit, and the rest of their salary is covered by business where these individuals will be employed. I think this is the best way to encourage employment of people in need to help them escape from their permanent dependence on the economic assistance, which is provided to help people just to survive.

Another important component of this scheme is that concerning young people coming from families under the economic assistance program so that they could become generators of income for their families if they agree to cooperate and take up jobs in small and big businesses.

Another important data is that no personal income tax is currently levelled on the monthly minimum salary of 300,000 lek.

Under the new fiscal package, no personal income tax is applied to monthly salaries of 400,000 lek. So, no personal income tax will be imposed on the salaries between 300,000 and 400,000 lek. This is yet another incentive. It is a positive incentive for the category of workers, who will take this whole tax-free salary home, but this is also a positive incentive for business too.

To conclude, as I already said I don’t want to repeat what the Finance Minister already said, I would note that the relatively massive support for the start-ups and the work due to be carried out by the Ministry of Finance and Economy in collaboration with the National Agency for Employment and Skills to develop targeted programs for the rest of jobseekers, who really wish to involve in the country’s labour market.

The labour market has a lot of vacant jobs on offer. I am not challenging you, as you represent small businesses and some of you cannot offer new jobs, but taking notice that some of you are nodding I think there are some of you needing more workers, but you all require that the potential candidates have a certain degree of qualification and skills, though modest ones.

Finding a job as a waiter at certain services is very difficult today and it would take a short training program for them to qualify for such kinds of jobs.

For this reason, we have projected a certain amount of funding to provide direct support to businesses to identify and hire this category of jobseekers. This would also imply that the current scheme of the National Employment Service needs to be reformed, because it is quite passive. Meanwhile, if the Agency will identify the needs of business and the latter would present a list of candidates for the new jobs they create, but who need to undergo a training program, the government will cover the cost of the training process for businesses.

Once a certain business receives the government funding for the workers training, it should employ these candidates. However, some businesses can host such training programs themselves for a number of specific jobs.

When it comes to more complex job profiles, the process will take place in harmony and collaboration with business, but by including a third party that will conduct the training program.

I am confident we can now really aspire to usher in a new era.

I am very confident that further consolidating the zero tax policy for small business has a significant value.

I strongly believe that repeating the commitment that as long as we remain in office until 2029, no taxes will be imposed on small business, providing also somehow a psychological relief so that business can plan its future and avoid unpredictable scenarios.

Any business recording an annual turnover of more than 140 million lek will definitely pay taxes, because after all the goal is the most successful small businesses move to a new level of earning a lot more, but where they would certainly start to pay more in taxes.

Thank you very much.