Tax Evasion Arrests Strike Fear Into Albanians

	Albania Prime Minister Edi Rama says he is “waging war: against fiscal evasion

Albanian police on Thursday said they had arrested two hairdressers for working in a side-street shop in Tirana that was not registered with the tax authorities.

According to police, Taulant Hasanaj, 29, was arrested for resisting a tax inspector while Indrit Lluka, 33, was arrested for “conducting an economic activity… unregistered in the tax office.”

In a separate action, police stopped several trucks transporting cattle and said they had opened proceedings against the traders.

News of the arrests gave new meaning to the much anticipated government campaign against the informal economy and tax evasion, announced with great fanfare on 1 September but which was then postponed for about a week when the authorities found themselves unprepared.

In Elbasan, 40 km south of Albania, some farmers have had their tobacco confiscated by the authorities who say the illegal but until now tolerated trade in domestic tobacco is harming government revenues.

In a separate development, the government has presented a new set of harsher measures against tax non-compliance, with changes in the criminal code. The new proposal states that fiscal evasion will result in jail terms of up to three years. Businesses may be fined up to 10 million leks (80,000 euros) if they sell goods without a receipt or fiscal bill.

The informal economy in Albania is estimated to be worth at least 35 per cent of the whole economy. There is a general agreement that fighting fiscal noncompliance is necessary but many see the new measures as disproportionate and ineffective.

Some note that no senior official has ever been jailed for such corruption although corruption is perceived as widespread and even though much fiscal evasion is perceived to be the work of big businesses with strong political links.

Monitor Magazine, Albania’s sole economic publication, agreed that fiscal evasion has to be fought but pointed to the climate of fear that the action is creating among small entrepreneurs.

“Fining businesses 10 million leks (71,000 euro) for selling without fiscal bill doesn’t make sense because such a fine is enough to bankrupt any of them,” Monitor said in an op-ed this week.

“We are not sure if such fines will be applied or if they will work only to increase the power of tax officials to extract higher bribes,” it added.

The op-ed also warned that the climate of fear will have a negative impact on economic growth and employment, as small businesses provide 90 per cent of the jobs available in the country.