Speech of Prime Minister Edi Rama at the meeting with representatives of the Chamber of Commerce and Industry, and business associations:

I have been looking forward to this meeting, because our major joint challenge is to consolidate a market economy that today doesn’t meet European standards, by establishing and enforcing clear rules of game so that everyone will have what they deserve and will contribute as much as they have to.

We have never seen it as a unilateral challenge of the government. Actually, challenge is a very soft word. I think that we are in a state of war as far as economic law order is concerned. In this war, those who comply with the law are injured on a daily basis, starting from the large companies to the shopkeepers, retail traders or private service providers, and obviously every consumer who doesn’t have back from the state coffers what should be returned in the form of wage increase, tax cuts, investments and public services of better quality.

The injured ones are those who should be 100% safe and protected, while those who are supposed to give account before the law, dodgers of all levels, from the largest to the smallest, they are the only ones to benefit from this. This is because this situation does not guarantee free and fair competition for everyone. It doesn’t allow entrepreneurs to compete in the market based on their own merits, ideas, talent and will. Illegal forces interfere continually, making it very difficult for enterprises to move forward fully safeguarded. I think that under these circumstances this challenge is absolutely bilateral, and our alliance with business is vital to put an end to this situation and win this war.

The new economic model that we are implementing with much difficulty day after day cannot be as successful as we expect to, if it is not protected by the daily aggression of robbery, to put it bluntly, or as they call it in academic terms, informality. This aggression is everywhere. It discourages entrepreneurs who want to make profits lawfully. This aggression prevents the lawful beneficiaries of the economic development, citizens and families from receiving what this economic development can give them. This aggression prevents the government and the state to respond to citizens as they should.

We’re not starting it from scratch. It’s an operation that coincides with a second phase of an aggressive reaction to win this war. While in the first phase we did what it takes to stabilize public finances. Nobody should forget that there is here witnesses who two years ago were on the threshold of bankruptcy because of government’s debts to them. 600 million dollars have been returned to the coffers of entrepreneurship. Imagine if you didn’t have those debts and the government had no obligation to return you those debts, over 600 million dollars, with inevitable sacrifices.

Don’t forget that you were required to pay bribery two years ago to have VAT reimbursed, and all previous governments with on top the last one kept VAT in an illegal and arbitrary way in order to compensate as much as they could the hole that was expanding in relation to the need for income. Today, VAT is refunded automatically and no one needs to pay a penny.

Do not forget that two years ago, this state collected just a little more than 23 percent of all contributions, and this was the amount of income from contributions in the GDP. We will reach 27 per cent this year thanks to the heroic work of Director General of Customs, in the literal sense of the word, with an administration that is very far from performing, and thanks to a historical leap in VAT records. Just as it is also thanks to the excellent work of the National Labor Inspectorate and to a historical leap in income from social security.

But I am not mentioning these achievements to tell you “look how good we are”. I am mentioning these achievements to tell you that we have brought out of the coma the economy and the finances of this country. We escaped a total financial collapse that could be a result of the chain effect created by the complete collapse of the distribution network of electricity. Today, for the first time in its history, the electricity distribution company requires no injections from the state budget, but it has started to become a regular taxpayer, something that has never happened before.

Many people ask for schools, hospitals, kindergartens, nurseries, stadiums which they have been expecting from the money that has been lacking every year, 150 million dollars of the company. First of all, the company is investing from its revenue for the first time after so many years to improve service quality. Secondly, I sympathize with people’s impatience. They have been working hard and fighting for over 20 years, and now they can’t take it anymore. They want everything to be done today. But if an informal house takes two years to be built, a destroyed state cannot be thoroughly built and cannot become functional in just two years. Asking this does not only mean building castles in the air, but it means more than that. It means asking for a ticket to fly to the moon with Ferdinand’s buses. There is no way that Ferdinand can take people to the moon.

I heard a dear friend saying that, as far as revenue is concerned, the contrary is true. We have made a revenue plan, and beyond the talking on the traditional methodology of the revenue plan-making, which we are addressing very carefully and with the assistance of international expertise, what we have lost as a revenue from the plan concerns in its largest part the first effects of the new economic model. We have a new economic model which, as we said since the very beginning, will be built on sustainable sources of economic growth, and will strengthen as much as possible the production and processing mechanisms.

Let me do very simple math – and you’re all better than me in doing math, especially when it comes to double balance sheets – so that you can understand what is happening. We lack approximately 155 million dollars. I talk in dollars because I am the people in this regard, I am not a professor as the Minister of Finance who talks in new Leks.

25 million dollars of revenue are lacking because of the reduction in the oil and minerals’ price in the international market. I don’t think it has to do with the government.

13 million dollars are lacking because of the reduction in the energy import.

Of course, both of them mean shortage for us, and we’d rather have this money, but they show also that when energy import is reduced, economy and good governance in the energy distribution system receive positive effects.

Tax burden for machineries and commodities has been reduced by 7 million dollars. We have removed VAT on machineries, by accepting losses in the budget, and we have had a drastic increase in the import of machineries. This means that economy has started to move in the direction we want and on the basis of the new economic model that we want to promote. If we applied VAT on the machinery board, we would have it in the budget. But we didn’t need it in the budget. To us, there is only one economy, not two. There is not a state economy and a private economy. It is the same economy.

22 million dollars are lacking from the VAT reimbursement. This is the highest reimbursement in history.

11 million dollars are missing because the procedure for reporting revenue has changed. We report on the previous month in the second half of the following month. Technically speaking, this postpones the final results but basically the money is still in the state coffers.

30 million is the lowest inflation. It is lower than expected. So, we have 30 million dollars from the lowest inflation, which means that the expected price increase has not occurred. Although everybody complains about increased prices, no such increase has occurred. This has been good for consumers, but actually it is lacking in the budget.

32 million dollars are lacking because of cigarettes. Increasing cigarette excise tax has caused a decline in cigarette consumption, and this has been intentional as we have widely acknowledged, because we wanted to discourage smoking. But this is only one element. The other element is the creation of a very large stockpile by the companies, before the excise increase came into effect, in order to use the old excise tax on sales. This increase in domestic production needs to be formalized, but it has been materialized in the 70% increase of the cigarette paper from import. Another element is informality, but in this regard only the extent remains to be discussed.

If we add up all these, the amount we have is propagandized by sources that have no credibility and who do propaganda every day. This means that this money has neither been stolen nor has it gone somewhere, and it is not an alarm bell either. So, what is going on with revenue?

This said, I want to make clear that we have a very great potential – we know this, and you know this. You know it and you have it, we only know it – provided that we take out of the grey hole of unlawfulness the money that belongs to people. Through this process, which is a radical operation process and which will be very painful for those who are not ready yet to comply with the framework of the economic law order, our common goal is to heal together a situation where those engaged in a business activity have the freedom and the guarantee that they will receive thanks to a real competition what they deserve because of their ideas, money and will, and won’t have to fight against ghosts playing any kind of tricks, or against the criminal collaboration of tax and customs evaders.

I’ve said it openly and clearly, and I have no problem to say it again. The heart of informality is corruption in the administration. Had the administration been built in all these years as a mechanism operating within a system that doesn’t’ allow its corruption, we would not have come at this point today. Just like it happened with the energy sector, where the collective looting of a national asset – which we are still fighting – brought to the criminal cooperation between thieves and robbers, beneficiaries of the energy and robbers within the system who would take bribes and not invoice the electricity consumption. They would even take money for making illegal connections as trusted specialists.

But we must understand something very clearly. This is not a state of war between the government and businesses. This is a state of war in the organization of our economy which is being corroded for over 20 years by this cancer called informality. And it will be a thorough radicalism.

We don’t have to convince each other, after 25 years, how market economy works. I heard here someone saying that penalties are not the right thing. Penalties will absolutely be the highest that robbers have ever imagined. 5 million (old) Leks will be fined every service point and retail sale point if they don’t issue the tax receipt. 100 million (old) Leks, or 100 thousand dollars, will be fined every source for every rigged balance sheet. And this is an once-in-a-lifetime chance, for next time you need to pay lawyers and not deal with us. I’m not talking about you, because you all of you are ok. You don’t have two balance sheets. I am talking about those who do.

On the other hand, we are in a state of war also with slavery. There are in Albania dozens and thousands of slaves, who are the slaves of your businesses. People that you have enslaved for a piece of bread. Slaves, people that have no insurances and do not exist, “grey people”.  Men and women, parents, girls and boys, more girls than boys, who are like ghosts in our economy, working long hours, but who do not exist. For this penalties will be even harsher. Those who will be caught funding a shame, recognized as such worldwide long ago, will be treated as slave-owners. There will probably still be people working off the records, but once they are identified, those who keep them off the records will be in real trouble.

25 years are enough for any justification, any theory, any philosophy, any academy, and if they are not enough for all of them, they are enough for the obligation that we have as a government to the people who vote or have the right to vote, and who do not exist. They are inexistent, nil. The National Labor Inspectorate’s work has been as excellent as sad for us. The data show us that within a year thousands of people have been taken out the clutches of a slavery that was legalized and has been considered normality for many years. But just like the tax officials, the Inspectorate will be more intensively present to hit the metastasis of this cancer, everywhere they might appear.

There is something else pretty clear to us, and I heard it from an entrepreneur. We know very well what this battle means to those who import according to the rules. This battle means a big threat from those who import against the rules, starting from the origin legality. If someone has a contract with a brand and imports from that brand within the rules of the Albanian state, and that product – I’m not giving names in order to avoid surreptitious advertising – comes in Albania, is certified and is in Albanian because the enterprise has a contract, this someone is threatened by others who go and get the same product with bags, motorcycles, boats and bring it in a foreign language, thus making a completely unfair competition in price. So, I know very well that the standards we require you to perform are a threat to you, if we are not able to close other channels of competition. Therefore, we need to have a very strong cooperation. We cannot do this without you, for you have such a knowledge that any Albanian secret service will never have even in 3000. So, your companies, which are threatened by this competition and have it very clear what is going on in the market of your interest, what goods are moving, who moves them and how they move them, need put this knowledge at the disposal of this war, and ask the government and state agencies to act and block this competition, because you are not going to succeed with guns in this war. In this regard we need to have a very strong cooperation.

We need also a very strong collaboration to push backwards and take out of our tax and customs administration system any kind of person who doesn’t live up to the expectations, who shows up at your door like the old-timey foreign exchange brokers with some money in their small bags, winking at you and saying: “either this to the state or this other to both of us”, acting ignorantly with the documentation and taking impossible decisions. For this also we need cooperation. The more you will try to close the issue with that kind of person, the more closed will be your path to success. It is an illusion to think that your success is guaranteed, if you become the ones to feed these dangerous parasites who eat away the finances and the economy of this country. We will include in the new legal package the penal punishment for every tax or customs inspector who cooperates in hiding revenue, in hiding activities, in hiding information. Starting from those within the tax system who are like Pal Melyshi – I’ve said this many times, but I have nothing against Pal Melyshi, – who on the one hand write you balance sheets and on the other hand come and check them, to those who pretend to not seeing a shop in downtown Tirana.

Control groups will monitor determined areas that will be checked twice by different groups to see if there are stores and businesses that have not been declared, registered, or having this kind of problems, or warehouses where goods are held against procedures. Needless to say that those who don’t report any of the above will be held accountable before the law. I know that a large number of warehouses has been unloaded in August, but it’s ok. I hope this won’t happen again, so that warehouses will be loaded with products that comply with procedures.

Everyone, every economist, every politician, every philosopher has of course the right to talk about taxes, fiscal facilities, the fiscal package, etc. But today we are far from having an economic legal order that allows us to do a miracle in this regard. We can do no miracle. We are in the straitjacket held tight by informality. The more we move from the illegal area of informal economy the money and slaves who become citizens and employees employed according to the rules, the more we will be able to reduce taxes, increase the salaries of employees not only of the state, but also of the private sector. There is no chance to do this otherwise.

I would also say that – and this is not only about you – that we will fix a term to end the absurd situation according to which big companies operate with cash registers, i.e. the source, the wholesale traders operate with cash registers. This is absurd. There are 70%, 80% cases. I know that it has come as a result of the fact that people were obliged to submit to the chain of informality, it is not people who corrupt the system but it is the system that corrupts people. Only 10% will have cash registers until 31 March 2016, and after 31 March 2016 0% of the wholesale traders will have cash registers. Zero percent! Only with tax receipt. 10% is only to allow a minimal accommodation space. We have had a long discussion, and I support zero % since now, while the Minister of Finance wanted to give more space, along with experts. We have reached 10%.

On the other hand, this monopoly of the cash registers, that we have inherited like many other wonders and which has been managed by the companies since the time of informal policies of concessions, is considered by us a state monopoly, and the companies that do this service cannot deal with it as a free market where prices are increased as they wish. Cash registers that they sell as if they were Steve Job’s products. So today, after many meetings, the ministers of Economy and Finance will fix a possible price for cash registers, with a drastic reduction of maintenance costs. Albanians pay for these cash registers as if they were paying for Apple computers signed by Steve Jobs. But this is not all, because they have a limited memory, and if they record more than 1800 reports, you have to increase their memory, and this requires 220 million Euros. What should we ask to the self-employed people in order to be formalized? Get a life-time debt? This was not our choice. We inherited it. Companies have made investments. We are not saying that they will work 100% for the state and for consumers, but we are saying that they should learn how to make money without having their blood sucked greedily by others.

That said, I believe that it is necessary, and for this reason we will discuss with the President of the Union and with the Board, to find a way to share better what business is. I do not want us to talk anymore about small business and big business, but about the difference between business connected to the wholesale chain, and self-employed business. A lady that mends trousers for the guys of the neighborhood, a shoemaker, or other craftsmen – we have also the law on crafts – are a source, a good opportunity for self-employment, but they cannot be considered as businesses that pay for an accountant, pay the VAT, and so on. So, a clear distinction will be made after everybody registers. Therefore, I make an appeal today to all those who are in these conditions, to craftsmen not dentists – dentists will not be treated like shoemakers, because they ask a lot of money to fix a tooth, and sometimes you cannot even use your jaw for three days, and they know nothing about tax receipts – we are talking about self-employed with a craft profession. We cannot ask those who sell embroidery works made by themselves, so they receive nothing from import or the wholesale, to go and record the accounts, but they need for sue to be registered.

In parallel with this, with the same logic, I continue insisting although it is not our decision, but it is the decision of mayors, to take action also for the tax on real estate. First, people must register with a minimum quota for the first house, 1 euro per year for the first house. The second house is another story, the empty apartments kept hostage by entrepreneurs are another story.

Returning to handicrafts, we need to make an absolutely liberal policy and preferably with no charge. Zero! Neither tax nor VAT, nothing. But they need to register and be monitored, to avoid the creation of a chain of tailor shops in the neighborhood, producing trousers like a factory, because this is a known Albanian creativity. We do not want to kill this creativity. We just want to strongly stimulate self-employment and create facilities for this business.

We will drastically reduce VAT on tourism for hotels. We will reduce it drastically, but we will not accept anymore that in Albanian hotels there are on average one person and a half employed. One person and a half, not two!

I phoned the owner of a hotel who, inspectors told me, resulted to have only one employee, and asked him: I’m sorry, how do you succeed in doing everything with just one person: the reception, the cooking, the washing, repairing the elevator and so on?

There is only one way, he replied. I’m not alone. We are all in this condition.

This is not true today either, because there are hotels that are very correct hotel, and it is not fair that they compete against people who run hotels and say that they have one and a half employees. This means that there is just one person doing everything, and the owner calls himself half a person, because as owner he cannot be considered employed.

We will fight this phenomenon in a drastic way. We will reduce VAT drastically. We will have the lowest VAT in Europe, the region and anywhere else. The lowest possible. Those who will want to investment in tourism in Albania, will be applied the lowest possible VAT, but on the other hand, even the most strict and imaginable control.

You know all of these things. I talked long as usual, because unfortunately I happened to be Prime Minister at a time when half the time we should remind people of where we were in order to come to reality. For it is really surprising how those who until yesterday, not only allowed but inspired this informality, show us with the finger to the closed shops.

The remaining half time, I am here to tell you where we are and what we will do. But the last word is: please, feel part of this challenge, feel comrades in this battle and do not let anyone to do things unnoticed by us, anything wrong, either in terms of unfair competition towards you, or in terms of the absurd often absurd behavior of the administration.

Only by doing so, we can not only repair your part, but also our part. Only by doing so, those who come there must feel totally responsible that they are neither going to the kulaks nor to the thieves, but they are going to people who are the greatest strength of this country, who generate development, create employment and contribute with taxes.

Many thanks for your patience!