Smugglers Evade Higher Taxes in Albania

	A street vendor in Berat, Central Albania selling open tobacco that goes untaxed. Photo: Gjergj Erebara/BIRN

Albania’s Ministry of Finance announced that it will stop cars and motorbikes transporting fuel across the borders – to stop Albanians from buying fuel in neighbouring Montenegro, Macedonia and Kosovo to benefit from lower prices there.

In a separate decision, the ministry said it was modifying the rules on the import of cigarette papers in order to combat the illegal production of cigarettes in the country, which is also related to a sharp increase in taxes over the last two years.

From May 12, the ministry said commercial vehicles carrying more than 200 litres of fuel acros the border will no longer be exempted from taxes.

It has increasingly become normal to buy fuel in neighboring countries due to the fact that Albania has higher taxes on fuel than those countries.

Citizens living near the border areas are no longer allowed to carry extra fuel tankers either in their cars or on their motorbikes, the same announcement added.

Albania has increased taxes on fuel by 24 leks (about 18 cents of euro) per litre in the last two years although fuel was already pricier there than in several neighbouring countries.

The plan was to collect more taxes in order to pay off the country’s mounting debts but it seems to have failed to achieve any result.

Taxes on tobacco increased by 48 leks (34 cents of euro) per packet during the last few years. The Ministry of Finance said it faced exponential growth in the import of cigarette papers, suggesting an increased production of untaxed cigarettes as well as increased consumption of home grown tobacco.

The ministry has prepared changes in the tax procedures, including a demand that importers of cigarette papers pay excise duties for any quantity of paper imported, equal to the amount of cigarettes that such paper can produce.

It was expected that higher taxes on tobacco, fuel and increased taxes on corporate profits would increase government revenues by at least 300 million euros per year. Instead,  the government is facing reduced tax compliance on the part of companies and individuals.

Tax revenues rose by less than 2 per cent this year, and the government has already announced that it may need to revise the state budget, to cut spending.