Speech of Prime Minister Edi Rama at the ceremony for the presentation of the second stage of the fight against informality:

Today is an important moment to continue intensively with the operation against informality by entering a new stage, which the Ministry of Finance has named the second stage.

Meanwhile, what happened during the first stage is a very valuable experience in order for us to see tangible results through facts, figures and the progress of relations between the tax administration, customs and entrepreneurship, but also to understand thanks to these results that the potential is still very large and still untapped.

We are all aware now, and not only we here in this room, not only the political leaders or senior executives of the fiscal administration together with employees or entrepreneurs, who have been partners of the government in this process since the first day, but the whole of the public opinion, of the great damage that informality did to the country, to society, to the economy and to the individual performance of each enterprise.

Informality expanded in over 20 years, and extended its roots in every sector, thus hindering the protection of customers’ rights in relation to the quality of the products and services; thus hindering the protection of workers’ rights; thus preventing the state from performing the regulatory and supervision functions; thus preventing public finances from healing at possible rates, in addition to influencing the quality of public services. I believe that every entrepreneur present in this room, and every entrepreneur in Albania who has tried to build a path based obviously on the will to make profit, but also on the rails of legality, can testify from their personal experience what damages their business has suffered due to the lack of freedom of competition, due to corruption and to the expansion of economic crime, as well as due to the imposed need to build dubious relationships with the administration.

We did not start the operation against informality in September. In September we started an open battle in every space where business either large or small is run. We have prepared this operation since the very first day, starting with the registers filled with the non-declarers of over a decade, exercising control and confiscating over 7.000 gambling equipment and auxiliary equipment for an informal industry, in a period of time that came to symbolize the failure of the state and of the coexistence of the government with economic crime; opening two important communication channels to report informality and corruption in the ranks of the tax administration itself, the portal “Stop corruption” and digital station; collecting over 500 reports of illegal activity, fraud on value added tax, income concealment, smuggling and different sorts of abuse. In September we realized that we had created the ground to start this wide-front battle, and we urged everyone to understand that formalization is a common good and informality is a disease that affects all of us without exception.

Today we are under new circumstances by making sure that every business is registered, is provided with a cash-box and who is aware of the fact that the non-declaration of workers is a crime.

We launched a digitized system that keeps stock of the activities performed by every business by means of a database for every business, thus creating the conditions for a close monitoring of the performance of transactions of both large and small businesses.

We could receive in real-time the data of such transactions, created by means of this monitoring the conditions for the tax inspection to be more rational and more controlled. And in fact, today we have some very encouraging results of this battle against informality, among other achievements, and we succeeded in this without performing abusive controls on entrepreneurship, without performing controls that were not approved of or were not based on stable grounds that could be to the detriment of business and for corruption purposes.

But what has started to make a difference is the construction of an electronic brain in our fiscal system, which is an indispensable aid for the management team and all the forces that are involved in this battle on the side of the state.

We have enabled for the first time the construction of online interaction bridges between tax and customs authorities, not through papers and coming and goings for many years that were translated in delays and abuses at the expense of business, but through a special platform that is being enriched every day.

Now, we have a common unit of taxation and customs, both for the risk and for investigation, which is based primarily on the work of the electronic brain, in addition to creating the conditions to organize well-integrated controls that increase efficiency in the revenue collection.

Of course, collecting more revenue is for us an inalienable objective, but it goes hand in hand with the objective to collect more revenue by creating more facilities for business. Collect more revenues by creating additional conditions for entrepreneurship to feel at ease. Collect more revenues, by going towards the complete elimination of the boring fiscal visits for companies.

Today we count 47.000 new registered entities or, in other words, nearly 50% on the number of businesses registered in July 2015. Today we count 83 thousand employees and workers registered in only 7 months.

Today, not through the door-to-door controls, but through the product received by the electronic brain built to support the work of our tax administration, tax liability has changed for 3.400 subjects who used to declare themselves as small business by hiding income, but who in fact were and are as of part of the large business.

Figures certainly have their importance, and even though today, more than about figures I want to talk about the climate and the partnership between businesses and the fiscal administration, let me say that the revenues of the first 3 months of this year are far beyond the objectives set.

During these first three months only, we have collected nearly $ 100 million more. To be precise, 96 million only from taxes, which exceeds the target. So, it is almost over 20% more than the same period of a year ago.

March, widely known as one of the most difficult months, closed having both administrations meet their targets, and with a significant increase in comparison with March last year. But more important than the figures as a whole, is the content of these figures because we have recorded a significant increase in excise products. Thanks to the electronic brain and the joint unit of risk and investigation, we started a process to close the paths of smuggling once and for all.

We have had a very significant increase in the value added tax, which is ultimately the most significant part of the formalization of the economy. We have had and expect an increase like never before in personal income tax, and we continue believing that the huge increase in social security and health contributions that was a result of this battle should continue. So, the potential is still greater than the result.

This of course created the conditions for us to zero taxes for 83.500 small businesses with an annual turnover up to 50 million ALL, in addition to halving taxes for 15.900 small businesses with annual turnover up to 80 million ALL.

This is a historic reform, as are a significant part our reforms. But this is the reform of the reforms because, inter alia, it is giving evidence that formalism does not reduce the profit of those who respect the law, but instead it brings mutual benefit, whether for the public or for entrepreneurs, by taking the economy to a new stage. A restructuring stage that creates for the enterprises favourable conditions to make long-term plans and to not be the victim of unexpected situations continued that have traditionally emerged as result of a non-existent state, the lack of respect of the administration for the enterprise, and the lack of sustainability in the overall tax regulatory framework.

I won’t enumerate all the views of international organizations about what happened, but I will go immediately to the second stage of which the Minister of Finance will make a detailed presentation. I will start by saying that the second stage is the ultimate answer to all those who, when the operation was launched, saw it with scepticism, mocked at it or thought it would be like one of those ordinary summer rains which the government in Albania was used to pour out in over 20 years, which would start with drums and end a few days later.

This stage aims at consolidating the process and make it irreversible, so that it will be impossible for any entrepreneur to imagine that they can return to the path of profits at the expense of competitors through informality. On the other hand, this stage will make the process irreversible, because it will be impossible for any employee of the Tax or Customs Administration to imagine that this is a state-building wave that will pass, and after this inspectors will go back to the era of fighting units that will raid on the doors of the companies and to whatever they want day and night.

This stage will mark also the biggest simplification of business procedures ever occurred.

Our goal is to not have to control businesses in Albania even for years, and to have such a system can compensate this persisting lack of controls on the ground with second-to-second monitoring capacity. So today, let me repeat this, our system of tax management has been provided with an electronic brain that is associated with every venture and provides ongoing information on every enterprise on a daily basis, without needing inspectors to go knocking on every door, and in addition it prevents increasingly any form of abuse that comes from visits on the ground.

Third, to consolidate our path of fiscal policy, not simply with the purpose of generating  income but primarily to create incentives for business that generates more revenues, and to continue communicating with the taxpayer in every level, in addition to increasing the human resources capacity of our administration.

When we discussed the idea that the administration should attend night school two years ago, I remember that some of the entrepreneurs who are sitting here in the front row laughed at it because it sounded funny. But in fact, night school has worked and will continue to work intensively for any tax or customs inspector who is part of today’s troop and will be part of tomorrow’s troop as well, upon regularly attending courses at the tax academy and periodically passing tests verifying their ability to cope with the challenges of their duty without harassing anyone.

As the minister said earlier, all we are asking the administration in this stage is to be more mature. This means that we want to increase the capacity of the administration to make analysis and to take the appropriate decisions, then get in touch with the enterprise. This analysis will be made only on the basis of risk. We are at a stage when we can certainly succeed and have impressive results by the end of this. The increase we see in the first three months of the income, first of all due to this fight against informality, we want to see it by the end of the year as the biggest battle ever fought. Because it is the biggest battle ever fought on the ground against this cancerous disease that has strangled our economy for many years.

I have still a few things to say. I want to publicly congratulate the Tax Directorate and the Customs Directorate, and especially the two ladies who are in charge of these directorates, because it has been a while since they haven’t been publicly commended. What they receive publicly are nothing but criticism. Therefore, these of today are fully deserved congratulations, because the work they have done in this period is absolutely commendable. And this is not to be complacent but rather to understand that a new path has been opened, and we will continue with perseverance on this path on a daily basis.

Secondly, warm thanks to the large entrepreneurs who became real partners in this endeavour, and who are still fighting together with us because no entrepreneur will ever become the “cat hunting the mice of the money” be it even in an ideal world. They will always remain the “mice to be caught by the cat”. But we are a lot more at peace and more collaborative because the benefit is mutual. This way, if enterprise was used until yesterday to fighting with illegal means against an administration that was the symbol of the violation of law, and of a state that was anything but a state, today I believe that we are giving enterprise every day the example of us being aware of our defects and aware of the necessity to improve on a daily basis our behaviour towards entrepreneurship. This fact has yielded the desired result to have entrepreneurs look increasingly at legal means, and understand that in the end those who have a solid business need only to have a free and fair competition, and that the cost of everything gained by means of unfair competition is a lot more higher and unpredictable because the other people do the same.

It has been for me a great pleasure to meet during this period a large number of entrepreneurs in meetings of different formats, and listen to the unanimous appreciation for our efforts and for some important changes occurred in the life of the enterprise, whose costs have been significantly reduced. These costs, both material and psychological, have been too high for many years because the enterprise was forced to deal with a state that appeared in the form of a gang, a variegated gang whose approach and face were not uniform, and this would increase the psychological cost of the enterprise enormously, because even if you were one of the most privileged taxpayers, this didn’t apply when the gang came to the door of your company, and you were nothing but someone in great trouble trying to get rid of the gang. People in trouble abandoned in the street and treated by the state in the most criminal way. This is over now, and we are in a new stage.

The aim of this second stage of the operation is to make the process irreversible and to have both parties come out of this stage on the same level. The administration on another level in terms of its mission, on another level in terms of its functions and duties, on another level in terms of the execution of its decision, and the enterprise on another level in terms of its real challenges to grow further and certainly to gain more, in an increasingly friendly and stable environment that has been cleaned of all sorts of ghosts, of the jungle of unfair competition and of any sort of aggressive appearance of the state at its door.

Therefore, thank you very much. All my respect to entrepreneurs who are here present and to those who are not here but who many more, for this partnership that we want to strengthen in order for all of us to succeed together in this battle that is necessary to have Albania cleaned of this large stain of shame as the most informal country both in Europe and in the region. As a country that has no reason to not be an example in the region and a normal country in Europe.

Thank you!

 

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The action against informality has enters the second stage, which is based on a new approach aimed at redefining the role of the tax administration through a new strategy lying on four pillars:

Management, focusing on the risk platform;

Simplification of procedures and the fiscal package;

Service to taxpayers;

Communication / education of taxpayers.

The risk platform has provided the fiscal administration with smart instruments of analysis and control by the offices, in addition to minimizing the number of fiscal visits and physical checks on the ground. Through an online communication system, businesses will be notified if violations or deviations are identified, and will be given sufficient time to return to normal. Inspectors will perform checks and pay visits on the ground only if the system will signal high-risk cases.

Likewise, another innovation provided by the risk platform is the sampling of the businesses to be analysed. The system has currently selected 300 large businesses distributed across the regions of Albania, and for them a detailed analysis will be made in every link of the chain that creates the added value, i.e. up to the small businesses.

joinformalitetit@financa.gov.al is the email address launched for an efficient and direct communication with the enterprise, for reporting cases of violations, but also for asking questions, clarifications, issues, information etc. It was presented in today’s activity, which was attended also by the Prime Minister Edi Rama.