Annual progress report 2015 albanian contribution – input I september 2014 – may 2015 table of contents

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  Guideline No. 9 of 27.02.2015 “ On Advance Pricing Agreement”
  

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  The new Law "On VAT", 92/2014, dated 24.07.2014, which entered into force on 01.01.2015, in paragraph 4 of Article 75, is foreseen as follows:
  

Within 60 days of the presentation of the taxpayer’s claim and within 30 days of the presentation of the exporter taxpayer’s claim, the regional tax directorate verifies the taxpayer's tax situation, conducts control, based on risk analysis and approves credit balance as reimbursable. Payment of the balance refundable credit is performed within 5 days of the approval through the treasury system. The Director General of Taxation, on reasonable grounds, with the request of the Director of Regional Tax Directorate, has the right to postpone the deadline of the audit and approve the surplus credit for a taxpayer to 60 days.

The Tax Administration, before proceeding with a claim for q refund of VAT to a taxable person, has the right to require that person to prove that the purpose of economic activity is the realization of taxable transactions, which give the right to the deduction of VAT.

Reimbursement of the VAT, up to 9 Apr 2015

Pursuant to the Decision of the Council of Ministers (DCM) No. 50, dated 05.02.2014 “On the approval of the strategy for the prevention and pay out of arrears of the action plan” the following activities were undertaken:

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  During the period Jan 2014 – Apr 2015, from 474 VAT refund claims (arrears - approved, but not refunded until 31.12.2013) with a value of EUR 59,987,428; 340 claims were refunded with a value of EUR 58,056,642. The rest were not refunded, because the taxpayers had unpaid liabilities and they had not placed bank guarantee conform to the above mentioned DCM;
  

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  During the above mentioned period, from 147 VAT refund claims (arrears - unapproved until 31.12.2013) with a value of EUR 27,308,456; 102 refund claims with a value of EUR17,474,535 were audited and approved. Out of these, 80 claims with a value of EUR15,556,214 were refunded;
  

During the period Sep 2014 – Apr 2015, regarding the VAT refund claims for year 2014, based on the Law No. 7928 of 27.04.1995 “On Value Added Tax” and the Guideline No. 6 of 27.02.2014 “On some addenda and amendments to Guideline No 17 of 13.05.2008 “On Value Added Tax”, as amended, 170 claims with a value of EUR 44,335,000 were refunded.

It is proposed the increase of cigarette excise tax from ALL 4500 / 1000 pcs (90 ALL / pack) , which is currently at 5500 ALL / 1000 pieces (110 lek / pack ) and 6000 ALL / 1000 pieces (120 lek / pack) starting from January 1, 2016 ; 6500 ALL / 1000 pieces (130 lek / pack) starting from 1 January 2017 aimed at aligning our legislation with that of the EU approximating Directive 2008/118/KE 16.12.2008

Starting from 1st January 2015, the new VAT Law, No. 92/2014, dated 24.07.2014, published in the official gazzette No. 128, page. 5887 entered in force. The law is partly aligned with the Directive 2006/112 EC, dated 28.11.2006 “On the Common System of VAT”. It consolidates and ensures that rules of applying VAT in Albania comply with those of EU member states, in order not to distort the conditions of competition and not to prevent the free movement of goods and services, by eliminating many factors affecting these conditions, not only at the domestic level, but also to precede the intra-community one.
16.4 Mutual assistance
The Republic of Albania and the Swiss Confederation conducted negotiations at technical level, to review, with request of the Albanian part, the agreement for “The prevention of double taxation and fiscal evasion”. The meetings were conducted in Berne, Switzerland, on 17-19 February 2015.
The Albanian General Tax Directorate signed an agreement with the Italian Revenue Agency on 5 September 2014 within the OECD program ‘Tax Inspector without Borders’ on the base of which an Italian expert is assisting Albanian Tax Administration on transfer pricing treatments.

The International Agreement Fiscalis 2020, signed by the European Commission and the Albanian General Tax Directorate on September, 2014, was ratified by the Albanian Parliament in January 2015.

The participation of Albania in the “Fiscalis 2020” Program has a crucial importance, since it will serve at the functioning and modernisation of the Albanian tax authorities and it is also considered as a means of support for our application to the EU Membership.
16.5 Public revenue office
Current situation
The tax administration had its organizational structure approved by the Prime Minister's Order no. 130 dated 6.11.2012 and the Minister of Finance order No. 70 dated 13.12.2012. According to this organisational structure, the total number of employees is 1586, with higher number of people in those structures that are related with the implementation of the law, the tax collection functions and the fight against tax evasion.

According to the organizational structure, the Albanian Tax Administration consists of the General Taxation Directorate and 14 Regional Tax Directorates. The General Taxation Directorate (Headquarters) is composed by the General Director; five departments or Deputy General Directors, as follows: Territorial Department (area A); Territorial Department (area B); Operational Department; Technical Department; Support Services Department and 15 other Directorates of the Headquarters.

The General Taxation Directorate has developed the training strategy for different fiscal areas and target groups starting from January 2015. For this purpose, the Training Program of the Central Tax Administration’ employees for 2015, was sent for approval to the Director General of Taxation, through the Human Resources Department. GTD has worked on training program for 2015, by defining the goals, objectives and strategy for the implementation of this program, (including target trainers and under programmed topics for training). The Curricula and training materials in different fiscal, based on the tax legislation in force, are drafted by training experts for targeted training areas in GTD, who were qualified in cooperation with foreign assistance provided for training. These experts also serve as trainers for the tax administration staff and other institutions, whose function is directly or indirectly connected with the implementation of the tax legislation. The relations of the Training Academy with fiscal experts (trainers) are independent ones, in accordance with the legislation in force.

Forms of training, widely used in the training process of the Tax Administration, are 'on job training' and 'off the job training', in accordance with the needs and target issues during the implementation of the training program.

During the period September 2014-March 2015, in cooperation with Fiscal Academy, approximately 950 employees of the Tax Administration were trained on different issues of the operation of the tax and fiscal system, dealing with the implementation of the tax legislation.

On completion of the courses, the Fiscal Academy made the assessment of knowledge gained, as part of the assessment of the performance of employees. The sector of training in GTD , based on the assessment made by the Fiscal Academy, gives the recommendations: In the case of the weak results there is recommended additional training; In the case of good results, those serve as a positive evaluation of the performance of employee.

At the Office of the Taxpayer Advocate, during the period September 2014 - April 2015, there were submitted 119 cases from various taxapayers, from which, 71 cases were covered by an in – depth investigation procedure.

62 % of cases covered by an in depth investigation procedure are submitted by large taxpayers and 38 % of cases are submitted by taxpayers of Small enterprises

The Taxpayer Advocate, during the first period of 2015 has given its help in solving problems encountered by taxpayers during the first implementation of the new IT System.

As far as the Taxpayer Service is concerned, during September –March 2015, the total number of the statements completed was 654.628. They covered VAT, health insurance as well as employment income tax.

Starting from December 2014 until March 2015, for the first time, as a result of the implementation of the new IT system, it is possible for taxpayers to submit electronic filing.

There have been 143,807 statements, including mineral rents, withholding tax, national tariffs and national taxes filed electronically during this period.

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  38 cases for concealment of income (Article 180 of the Criminal Code);
  
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  1 case on Creation of the VAT Fraud Schemes, according to the article 144/a of the Criminal Code.
  
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  14 cases on non payment taxes, according to article 181 of the Criminal Code.
  
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  4 cases on organizing inadmissible lotteries, according to article 197 of the Criminal Code.
  
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  4 cases on damage of the tax administration’s hallmarks, according to article 182/a of Criminal Code.
  

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  8 employees are referred to the Prosecutor’s office, from which :
  
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    6 employees that have abused on their duty with economic consequences, to the detriment of the institution, according to article 248 of the Criminal Code
    

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  7 employees are removed from the Civil Service for failure of tasks and misapplication of legal regulations on the performance of functional tasks.
  
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  for 6 employees are undertaken the disciplinary measures, due to failure of their functional duty.
  

The new system is designed according to the vision that electronic declaration (e-filing) is used only by taxpayers, while the base system (core system) is used only by employees of the tax administration both in the center and in the regions.

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  The new system has created the possibility of exchanging with the National Registration Center the taxpayers database on-line, through the exchanging information system for public institutions; the data are automatically loaded through the systems for both institutions.
  
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  It has created the possibility of improving data reception for these processes, the online registration process, the definitions of the tax responsibilities and especially the taxpayers deregistration.
  

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  By the implementation of the New IT System, 100 % of taxes and liabilities in Albania will be self declared through the introduction of the tax statements.
  
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  100 % of tax statements will be submitted in electronic way.
  
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  New Program E-filing has enabled the introduction of validation rules for all tax returns.
  
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  By the implementation of the new IT system, the automatic evaluation is introduced regarding non declared taxpayers.
  

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  The concentration of accounts in only one account for each branch has created the possibility for each taxpayer to pay in the tax account, wherever he is, and he is not obliged to be presented to pay in banks branches that belong only to the Regional Directorates of Taxes or tax agencies where he is registered as a taxpayer.
  
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  The new IT system has enabled the implementation of an accounting system which manages the liabilities, credits, refunds, payments and automatic calculation of interest and penalties, etc.
  

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  Taxpayers have the opportunity to receive automatically in e-filing system, all the necessary reports for each payment of tax liabilities.
  
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  Standard documents, such assessment notifications, are generated automatically by the system.
  

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  There is built a reporting system in real time directly from the database, which is available to all tax administration in all its levels, by creating new opportunities for better management.
  

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  The implementation of the New IT System implementation has detected a substantive reviewing for all agreements that GTD has with the other institutions, such as: the General Directorate of Customs, the National Registration Center, General Directorate of Treasury, the Social Insurance Institute, the Civil Service, etc.
  

The aim is to move from the exchanging information on paper, or in the best case in CD, in exchanging on automatic on-line data, which, not only facilitates and improves the mutual work of these institutions, but also reduces the administrative burden for taxpayers.

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  The new IT system provides an improved platform of risk analysis, where all economic sectors and businesses are subject for the risk measurement and are ranked according to the taxes with risky levels due to the evasion.
  

The monetary policy framework is laid down in the Monetary Policy Document, which was revised in January 2015. The new documents clarifies on the inflation targeting framework of monetary policy and removes the tolerance band of +-/1.0 percentage points on the argument that it improves communication and accountability. Monetary policy decisions are based on the deviations of forecasted inflation from the inflation objective and the assessment of balance of inflationary pressures in the period ahead. To this end, the Bank of Albania employs a comprehensive set of economic and financial indicators. The current monetary policy framework, known as inflation targeting, is complemented by a free exchange rate regime.

The Bank of Albania strengthened the expansionary stance of its monetary policy with the aim of bringing inflation back to the target and aligning inflation expectations. The policy rate was cut in November 2014 and January 2015 by a total of 50 basis points, bringing it down to a minimum of 2.00%. Simultaneously, the Bank of Albania has continued to inject liquidity in the market using reverse repo operations with a maximum maturity of three months. The Bank of Albania has continued to use forward guidance to communicate its monetary policy suggesting that the monetary policy will continue to be stimulating in the medium term to address weak demand.

The decreased liquidity and inflation risk premia in financial markets have facilitated the transmission of the policy rate changes. In general, the cost of funding has decreased and it has been translated in lower borrowing costs. Even though the transmission of monetary stimulus in the lending interest rate is evident, lending activity remains weak. The recovery of lending activity is hampered by the risk averse behaviour and high uncertainties perceived by both the private sector and banks. The demand for loans continues to be low. In addition, banks remain excessively prudent in their lending policies given their large NPLs. The latest results of Bank Lending Survey⁵⁸ have confirmed the strengthening tendency of lending standards in the last 2 quarters.

Albanian Financial Instrument Settlement and Registration (AFISaR) system is the central system of settlement and registration of the securities. Based on the existing legislation, in this system shall be settled only securities issued by the Ministry of Finance, as the representing the Government of Republic of Albania, as well as the securities issued by Bank of Albania (if any such a security shall be issued in the future).

The new regulation aims to regulate completely the activity concerning the operation of this system. In concrete, there are regulated in detail the characteristics of this system, which have been established in compliance with principles of Bank for International Settlements for the system of settlement of securities. The aim is the management of risks concerned with the securities trading. Also, an important part of the regulation is the role of Bank of Albania as an administrator of this system; the rights, conditions and obligations of participators of the system; rules that shall be followed in the operation of the system; communication with the system, as well as its tariffs. Last, but not less important, in the regulation there is a special chapter where is regulated the clause regarding the question when a transaction is considered irreversible in the system AFISaR (according to law no. 133, dated 29.04.2013 “On Payment

Systems”). It is considered important that this clause is well explained in the regulation, because it is closely related to the moment of insolvency status of a participant of the AFISaR system. The amendments and/or the new regulations approved during the reporting period (as listed in the table) are related to the introduction of the new system AFISaR.