Speech of Prime Minister Edi Rama at the meeting on the fight against informality with representatives of the chambers of commerce and business associations in the country: 

Hello!

Allow me to point out two introductory issues.

The successful conclusion of the Eurobond operation, where Albania was released in international markets. After we got what we wanted in relation to the old Eurobond old, we have now a new Eurobond of 450 million Euros and 5.75% interest, which is the most meaningful indicator of the work and image that the country has built throughout this journey.

The fact that markets responded so positively in a climate which is not very favorable in the financial markets is the best and the most solid answer to the claims according to which economy is not doing well, the finances of the country are not healthy, the operations of the government are not giving the required result, and above all that reforms are not consistent. The opposite is true. Precisely because we are doing the necessary reforms, the consolidation of finances continues, economy is giving clear signals of stability and sustainable growth, the response of the financial markets was even better than expected by the most optimistic ones in the working group for the Eurobond.

Although the public presentation of the completion of negotiations with the IMF will be done tomorrow, I can anticipate it by putting an emphasis on two aspects.

First, there will be no tax increase. This fact confirms, this time not with our voice but with the position of the IMF, that the propaganda made about the revenue decline has nothing to do with the false reasons that are served to the public. But on the contrary, it is related to the objective situation of international conjuncture, ranging from the decrease in oil prices, the price of minerals, other aspects concerning the exchange rate, inflation and so on, and on the other hand we will not to touch the capital account, so we will continue to invest.

Confirmation of progress within the program of fiscal consolidation and economic growth with the International Monetary Fund is the best and most encouraging confirmation that the country could receive today, and when I say today I mean we are in a process of reforms which is far from being completed; we are in an ongoing operation.

We are still in the operating room cleaning the organs in the body of our economy and state from the metastasis of the cancer created due to bad governance, corruption and mismanagement in all sectors.

We are here today continue with an open debate about the operation against informality, which is one reason why in the negotiations with the International Monetary Fund the government was in a favourable position of trust. We have created the belief that we do what we say and we say what we do. Of course, this allows us and gives us opportunities to move forward. We are not yet at the point where we can talk about the final result, but we are at the moment when we can show what we have done, why we did it and where we’re going, precisely because we are doing what we are doing.

It has been continuously said that the operation against informality is in conflict with business interests. This can be said only in countries that have agreed with informality, as an inevitable evil, while in any normal country, in any serious country, such an issue cannot even be discussed. Informality is a trap for the business and for the economy of a country. The greater the informality the greater and deeper this trap.

It is certain that the operation is providing sufficiently encouraging results. It is certain that thanks to this operation, in a reasonable time, we will be in the conditions where we are today, as we have successfully implemented the energy operation.

For the first time in the history of relations with international financial institutions, energy has not been an issue in the discussions with IMF. For the first time!

For the first time the Albanian government has been facing financial institutions and the days to come without the terrible burden of debt and the inability to finance the energy sector normally.

This is due exactly to that operation we did. We will be in the same situation after this operation gives its stable results, while the results we have achieved so far are the results that show us very clearly that this is not only the right way, but it is the only way, and there is no alternative to it.

Complaints, lamentation, weeping and above all dissemination of ideas “go along until tomorrow, for today people don’t have any opportunity” are all expressions of the inertia of the past. We have a very clear relation with the past. Our relation with the past is such that imposes us to act aggressively and break from the past in every sector, and we are determined to break from the past in relation to informality.

In fact, today we are at a time when serious companies and legitimate business are being created a totally new space, which they did not have until yesterday. They are being created the space for free competition and for earning in base of their merits, in addition to being protected from unfair competition and illegal profits of those who, because of the space that created by informality, through illegal actions and half illegal activities, have imposed on certain markets and on the country’s economy distorted realities.

We want every business to be treated equally. Of course, words and deeds are often oceans apart, but surely the goal and method of an operation cannot be judged by the pain caused during the operation, and neither by the inevitable deviations that have we faced and continue to face due to an administration which is also undergoing a process of reform and self-transformation.

On the other hand, in addition to equal treatment it is extremely important to ensure that the measures taken will be consistent over time. We started this operation in a situation where every business, even the most reputable companies, had to face the problem of informality within themselves. For this reason, we have decided to give them the time to declare ad correct themselves.

Evasion of the past and the inertia of the past must be addressed. We have given time to all companies to address them voluntarily, by the end of this year, given that ultimately this is a situation that has been allowed for over 20 years. This justifies to some extent the companies for this interim period of time, but it is only an interim period that companies should use intensively to be in order with themselves and with the state. It is an incentive, not an amnesty, an incentive for self-regulation, giving us the opportunity to increase assistance, help and support to taxpayers who want to respect the law.

By March 31 of next year, all wholesale companies can sell only 10% to the individual, by registering this 10% in the cash register, while the rest of the good will be included in the tax bill. We inherited a situation where big companies behaved as small business. Wholesale was like retail, a terrible distortion of the entire chain of the economic activity.

This is not a punitive measure. It’s a measure that actually heals our economy and helps primarily small retail to receive bills and justify any goods in their inventory.

We are very pleased that we managed to substantially change the reimbursement procedures of value added tax. If until yesterday this procedure was administered locally and in a chaotic manner, any subject asking for reimbursement had to be controlled, control and decision-making standards were set at the individual discretion of an inspector or directly related to illegal benefits of the administration.

Several years have passed and nothing has been reimbursed. You know this. This situation has been reversed. Today there is an instance of VAT refund; application are made online, and according to the new system of risk analysis reimbursement is done automatically, without any control if the subject is not at risk, standards are the same for everyone, and reimbursement is not determined by any individual or bureaucratic opinion, and the maximum time for reimbursement is 60 days.

Thanks to this operation, today the tax on value added declared for September is 4.8 billion, and this is a historic leap in relation to this income which is a base income for the normal functioning of the economy, commercial activity and the state itself.

We have declared 11 million dollars more, or 30% more than a year ago. Now that we are talking reimbursed VAT for September is 77% more than a year ago. Everybody benefits from this system, the economy, the state, any business directly. Refunds made have been 13 million dollars more than a year ago. What we want to do together with you is to change radically the relationship between business and the administration when it comes to controls, so that we won’t have controls with no targets, controls selected spontaneously and often suspicious, and controls that re not announced on due time and are performed without cooperation.

Today we are in a new phase. Subjects to be controlled are not chosen any more at the discretion of the administration, nor are they determined based on the appetites of certain people, or worse as it used to be until yesterday, according to the political desire of some, but only on the basis of the risk analysis which is done scientifically and through technology, and it is technology that determines the objectives of control, thanks to the data obtained in real time from all economic and commercial activity in our digital database.

Companies that are fiscally certified by international companies and that are practically on a list, based on an instruction of the ministry of finance ministry, will line up to companies with less risk. So, we have given the opportunity to companies, to all of you and to all those who are not here, but who belong to the same category, to completely avoid administrative controls by doing auditing with international audit companies. Introduction in this category and audit by international auditing companies will make every company that follows this procedure to enter the category of companies with less risk or no risk. By accessing the companies with less risk or no risk, there will be a totally different treatment by the tax administration.

We are aware also for another fact, you know it better than us. Frequent changes of legislation over the years have brought many problems and a lot of annoyances for business.

We have embarked on a process of collaboration with PricewaterhouseCoopers, a world leader in the field of counselling and fiscal matters, and we have started to arrange meetings across the country aimed at informing and increasing the knowledge of all taxpayers, particularly small businesses on the whole frame of fiscal law.

Within such a very short period, the registration of businesses has been really impressive and very encouraging. Today we have 136 thousand businesses or 25% more than in August 2015. So a quarter of the number of businesses that are active in Albania today is the result of this operation concerning only the months of September and October.

The declared average turnover is 50% more than in the same period of 2014. Economy has not increased to an extent that justifies this. Its legal aspect and formalization have increase. So 50% more declared turnover, which is a remarkable figure.

Large business has 63% of share of the turnover growth, and this is very positive news. Small business with VAT has 10%, while small business has 27% of the share.

Even more impressive and encouraging is the figure of registered employees, of those who were former slaves off the records and today are employees who pay taxes, are insured and have a clear perspective. It is an unthinkable number.

There are 128 thousand of them, of which 73 thousand have been registered for the first time. The rest have been registered again after they have changed job. But 73 thousand is a new figure.

Good progress has been made with cash registers, which have increased eight times within this period. What is more important is the duplication of the work of cash registers, which make 40 thousand transmissions a day, from 20 thousand they did the same period a year ago. Also, the number of tax receipts issued during the period of operation has increased drastically. 37 million tax receipts more compared to the same period a year ago, or 665 thousand more tax receipts a day, compared with a year ago.

These are not data for us to celebrate, but they are only part of an ongoing process that is trying to consolidate and become stable, become normal, and there is still more room to normalize the process. In the following days, the Ministry of Finance will launch a promotional sweepstakes for the New Year in relation to the tax receipt, and there will be several categories of winners among citizens that will collect the higher number of tax receipts.

We believe that this is a process that will give our economy, our society and business a new breath. Legitimate businesses are finally in a condition that does not make them feel like fools who pay, while the others, smarter than them, do not.

These data merely to establish a framework for dialogue, with full awareness on our part that we and our administration have still much to do to be up to the ambition of this operation and of our common ambition, to create an economy where informality will reach acceptable parameters as in any other country in the region or in the European Union.

We are today in the conditions when we see a significant increase in manufacturing. Therefore, we have assumed to pay as a state the new obligation to customs of manufacturing exporters following the introduction of screening. It will not be a burden for companies, who won’t have to think any more about raising costs and lowering their competitive ability.

This operation enables us to have a new approach to self-employed craftsmen. Their taxes will be zero, provided that they are registered and insured. There will be a defined list of all crafts that create self-employment, not employment of others, and they will not pay any tax. Likewise, the same for the markets of neighborhoods, where each vendor will be treated as street vendor, but with the condition that they are registered. The same will be applied to street vendors who will be issued a registration document by the municipalities.

No more unregistered people operating off the records, and for every kind of illegal activity drastic measures will be taken. There is no reason for us to start from fines and penalties to discuss. Fines and penalties are not for those who are ok. We are in this situation thank to the policy of those who used to fine little by little and everywhere.

Our perspective is that the fines should be a few, but they should be heavy. The same, penalties should be a few, but severe, so that their preventive character will work. When you know that the punishment is severe, you are much more motivated to respect the rules. When you know that punishment is ridiculous, you are not motivated to respect the traffic lights, the traffic rules and so on.

And this is our story all these years. We have no reason to start form the penalties to establish policies. Punishment is for those who violate the law, and we cannot get together and pity those who violate the law. Let anyone who violates the law pity themselves. I believe that it is simple and normal, there is nothing to discuss here. Otherwise, we will distort the whole essence of what we want to do. For what reason is a company motivated to comply with all the rules, if the penalty is ridiculous when you don’t comply with them? They just do a cost-benefit calculation and say: “Who cares! I earn a lot more than if loose if they catch me. Even if they catch me, I will be released and will continue to compensate it”. This is a business that has to be stopped in Albania. There is no need to discuss this thing. Just look at how the energy worked, after the aggravation of the measures didn’t bring what has been preached, but brought a greater incentive to be in order.

Because this is an ongoing process, I believe it is always appropriate to discuss, to interact, to hear each other. We have a lot of things that need to fix, the same as you. We are not here to represent perfection against you who make nothing but mistakes, but we are together on the same boat, and both parties have a lot to fix. Of course, the state and the administration have much to fix, because if there were nothing to fix, you’d be much better today.

Many thanks!