VAT rate on tourism investments only six percent

Prime Minister Edi Rama’s remarks at meeting with tourism operators in Durres:

Thank you very much for attending this meeting! I really appreciate you all for briefly leaving off work to attend this event.

Substantial progress has been made towards formalization of the economy and the transactions carried out by the accommodation structures and the travel and hospitality operators. Issuing an invoice for every performed transaction is now a more common practice. Of course, there are still gaps to be filled and preparations for a significant technological innovation are underway in a bid to better serve the formalized business and further formalize business, based on a very successful model applied by Croatia and a number of other countries in the region. The Ministry of Finance is intensively working on this program, which will then be made available to all businesses to ensure online real-time registration of every transaction.

The businesses’ daily turnover is registered through fiscal cash registers, while real-time recording of each transaction is a must and the new technology provides us this opportunity designed to relieve the companies and businesses from the heavy burden of accounting work and provide smoother business operations.

I believe you are now classified under the big business category, because your annual turnover exceeds the 80 million lek threshold. I don’t know whether your annual business turnover is higher than 140 million lek, a category which practically includes 91 percent of all businesses operating in Albania and which actually marks the real separation between the smallest and biggest enterprises. The government will make a decision on the triple tax reduction on this business category. So practically 91% of all businesses in Albania will see their profit tax rate reduced from 15% to just 5%, a move which will allow small businesses to stop lying over the annual turnover and feel no longer distressed at the dilemma whether to tell the true turnover that if we declare an annual turnover of over 80 million lek then the profit tax rate would be 15%. They will not be able to work without being worried, without fearing the fiscal inspections, and without playing the hide-and-seek game with the government. At the same time, the government for its part will be a partner in an alliance which will swiftly address the problem you raised and will further formalize the whole sector.

We fully support this sector. We are willing to do a lot more if you help us to understand what we can do more. I would like to point out that the first Nordic tourist arrivals is the most meaningful indicator of the ongoing transformation. It is a transformation that began few years ago only, because everyone knows quite well what was going just few years ago. Few years ago only, right here at the country’s tourist potential, the waste water and sewage were discharged into the sea. The area we are today in offers a panorama which differs absolutely not from the panorama we view in the Mediterranean, but a few years ago it was a marsh with the only year-round tourists being the seaweed and ruins that kept everyone away. This is how it is transformed today thanks to the cooperation with the Municipality of Durres, which has done a lot since Mayor Vangjush Dako took over, but it has done a lot more since we assumed power and made tourism development a top government priority.

The sewage are no longer discharged into sea along Durres coast, while a long-awaited, but never actually finished investment in construction of new water supply system is underway. It is a major ongoing investment that has already started to yields its initial results in terms of water supply to an area everlasting thirsty.

I believe it is very important for us to keep on – and I am confident this will add to the list of the reasons you promote to attract tourists to Albania – to continue promoting and supporting agritourism. The rural part of Durres municipality has tremendous potential for the agritourism development. It offer fantastic untapped potential we are seeking to exploit in order to give a chance to anyone with no private seafront home, where no seaside hotels can be built, or have no access to the agricultural market due to difficult geographic locations, but which are home to nature wonders and beautiful tradition to convert their private homes for the exclusive use of guest accommodation and a lucrative and successful business of hospitality tradition.

Therefore we won’t cease promoting agritourism; we won’t stop telling people living in countryside that their development potential is just one. Instead of spending a lot to send their products to the market, instead of floundering around striving to sell a bag of tomatoes on the streets, we urge everyone to invest in projects in order to attract tourists to their villages and homes. Tourism is an export and being unable to export fruits and vegetable, our villages can export hospitality and tourism taste.

We are seeing a major transformation in terms of the approach and the interest in investing in the four and five-star hotels, after putting in place important legislative measures which make Albania tourism highly competitive in the region in terms of its advantages.

Many misunderstand this project since they fall prey to a disorienting propaganda, claiming that such investments and incentives are announced to favour the rich people. Actually, this investment, which I hope will soon receive the international five-star accreditation it deserves, has been made on a plot where a ruined building stood few years ago. Today, this hotel facility has employed 60 people and has created 15 other new jobs of all categories, let alone the fact that the hotel is full of foreign tourists and fully booked by foreign visitors. The four and five-star hotels will attract a number of tourists, much lower if compared to the number of tourists at other tourism levels, but who spend more money. This is money that remains here, the money that will certainly influence the rise in salaries and will gradually increase real employment and higher-paying jobs. This is the logic behind the decision to support investments in the four and five-star hotels.

This is also the logics why we have decided to support agritourism too, by cutting the value added tax rate to six percent and the profit tax rate to five percent only and remove any other tax or tariff on the construction permits, because we know well that the decision offers an opportunity to lift people out of poverty.

Having said all these, we are paving the way to channel the emigrants’ savings into the Albanian economy. There are an endless number of emigrants from Albania’s rural areas who are currently working in Greece, Italy, Germany, Switzerland, the Netherlands and England, who keep on working hard and save their money in order to help their families back home, or set aside some money for their future. I am confident that each of these emigrants will make the right calculations and will eventually decide to invest their savings in their family homes to start an agritourism business, while staying and keeping working in the countries where they are, but I am sure that within a year he will earn a lot more money than they earn working for others.

To date, this was theoretically beautiful, but practically difficult. With a 20% VAT, with a 15% profit tax rate and with the mass seaside tourism option only made emigrants hesitate and to think seriously over their potential investment in Albania.

This entire picture has changed now. Whoever decides to invest in agritourism will also benefit from the ever growing number of tourists who choose seaside to spend their summer holidays, but in the evening, as it is the case in all Mediterranean countries, they prefer to take the car and go for a 30, 40 and 60-minute drive to a cooler area to enjoy local traditions, food and delicacies through agritourism.

Tomorrow we will be meeting a large group of investors from many countries who have expressed direct interest in building five-star hotels in Albania and attract internationally leading companies which will ultimately alter the country’s image in terms of security and quality of services Albania already offers.

According to official data and the foreign visitors’ accounts, Albania is one of the safest countries. Mayor Dako introduced me to two Norwegian tourists on their third visit to Albania and who put it quite simply: a country completely safe, cheap prices and fantastic hospitality. However, many still think that if you visit Albania you would most likely end up getting killed. That’s why whoever visits Albania is nicely surprised as they find something completely different from what they have been told. This is what I have also heard from the parliamentary delegation members who visit Albania on so-called fact-finding missions – they are actually on true tourist visits, since they can’t find and establish facts in a one-day stay – and they are surprised.

Some months ago, a political tourist arrived in Albania and he refused to leave the airport’s VIP lounge unless armoured cars and guards armed with automatic rifles escorted him. It was a 40-minute debate. We told him we don’t offer such e service, since our guards are armed with guns only. If you don’t accept them, then you are free to fly back to your country. He decided to drop his demand and a day later met me in my office and apologized, saying he had imagined Albania a completely different country from what he had seen for himself.

It is quite difficult to change such an image only through the people who visit and find a different reality, but when five-star hotels from leading companies you find all over the Mediterranean, the situation speaks for itself, just like it does today for Montenegro.

Montenegro was the region’s black sheep that made the headlines on the international newspapers in the’90s, which reported on illicit trafficking, smuggling and crime. Today, the perception had changed completely, although Montenegro, Italy and many other countries face same problems we deal with. Montenegro pursued visionary policies and with much effort and sacrifice it belongs today to another category.

But what does Montenegro has more than we do? Nothing more, except that for 20 years it was under the leadership of a great man, with a vision and a unique determination.

We are taking the first steps to a new phase. The first steps have been already made for sometimes now, but these are the first steps towards ushering a new phase. And I am very glad we have a system set up not by the state, not by the government, but by the talent and courage of the people as this lady here, whom I meet for the first time today and would be very happy if she wants to take my seat and I would give my seat to her with great respect literally, because such people show what can be done in this country if you are willing to do things and stop complaining and  waiting for the state to come and solve all the problems. These people are a source of strong inspiration for me, because if a woman manages completely on her own to attract around 90 thousand tourists to Albania then we will be able to attract over 10 million visitors in the next five years.

Albania was visited by 5 million foreign tourists last year, but our goal is to increase the foreign tourist number to over 10 million in the next five years. Such a high number of visitors would lead to a significant change to the country’s economic power, which will be also reflected in the economy of households involved in tourism industry.

All of these require vision, reforms, perseverance and patience and cannot be done overnight. I know that patience is the dearest commodity today in Albania. Finding patience and being patient is the most difficult thing after so many years of waiting.

On the other hand, over the past four and a half years I believe we have shown it is worth of waiting and be patient for a little more as the largest investment package ever has just been launched with the Arberi Road and it will expand further from Shkodra to lower parts of the country to build a modern road infrastructure network up to highest European standards.

I would like to thank you again for your presence and appreciate for whatever you do.

Thank you lady! I am really grateful and honoured for your presence together with other participants. There are undoubtedly many other people contributing to this sector we will do a lot more to support without forgetting the saying: I did as much as I could. If I could do more, I would have certainly done.

Thank you very much!