Recently the Albanian Government has put forward a draft law on fiscal amnesty, which has received almost unanimous condemnation from the international diplomatic and foreign business lobby representatives. Cynics point to this draft law in light of US and EU reports regarding international organized crime with ties to ethnic Albanians overseas and have suggested that this is simply a ploy to bring in international slush money, legitimizing a part of it, while a percentage finds its way into the domestic election cycle. In order to avoid such allegations the Government must identify the economic root issue that has prompted these undeclared cash balances and solve it in order for the need for fiscal amnesty not to repeat. 
Alternatively, the draft law should be abandoned. 
When fiscal amnesty is implemented it can be coupled with a systemic change in the economic system that would define a clear point at which a country cleans up the residue of a previous economic environment and moves into a new one.  
Albania regularly passes laws that overregulate the symptom rather than dealing with the root cause of the issue that should be addressed. The root cause of the fact that money is outside of the formal financial sector is that the individuals holding the cash balances were either evading taxes or, as alleged, engaged in illicit behavior. Provided that the draft law is not ostensibly aimed at laundering money from illicit behavior, the law should deal with a failure in the tax system which has caused the need for fiscal amnesty. If a fiscal amnesty were to be successful it would address the root causes of tax evasion, both in finding an appropriate level of taxation relative to Albania to incentivize self-enforcement, as well as finding an appropriate level of taxation that funds some enforcement against outliers to the system. Looking for a parallel from the US system one can see that America does not implement a single tax system. It is a conglomeration of over fifty states and several territories that each tailor their own tax system to their micro-economies and subcultures.  
Some states have zero tax rates on sales, some have zero tax rates on personal income, some zero tax rates on business activity. Similarly, as Albania envisions itself as one of several members within the European Union, it should re-evaluate its own system and tailor it to the reality of its people so as not to repeat the environment which has prompted this fiscal amnesty discussion. 
What legitimate sectors are most tied to this fiscal amnesty proposal? As mentioned by the Government, the Albanian real estate sector operates as a major avenue for cash payments to be made alongside the official buying price in order to avoid local taxes. This draft law may legitimize the cash-on-hand of real estate developers and those who have sold property, but will not solve the underlying problem. It requires more comprehensive tax reform. 
The Government has suggested that the banking sector hasn’t always been available to the individuals who have generated the funds in question. Assuming that these theoretical Albanian diaspora with undeclared cash balances have worked in the United States or European Union, as well as most other parts of the world, the banking sector in these countries is, and has been, well established for centuries. Albania itself, post-communism, has had a reasonable private sector bank presence since 1996. The Albanian banking sector has been interconnected with the global markets through SWIFT since the 1990’s as well. If someone chose not to put their money into the formal financial system in Albania it has not been because those institutions did not exist. No fiscal amnesty scheme is required due to lack of financial inclusion by any significant section of Albanian society domestically or internationally. 
Is there a practical driver for fiscal amnesty? Is there an economic crisis that must be addressed that is so deep that the Government might be willing to turn a blind eye toward the source of funds being injected into the economy? The draft law suggests that money subject to amnesty will be put directly into the banking sector. 
Would an additional inflow of external funds benefit Albania in the long-term? No, Albania does not need additional liquidity in the economy. To the contrary there are already more amounts of currency chasing too few products, thus inflation is a current problem in Albania. The banking sector, as confirmed by the recent Central Bank Annual report, shows that it is and has been over-liquid for some time. Banks remain well capitalized and profitable. This law is not needed in order to help the banking sector. On the contrary this draft law would damage Albania’s banking sector. Each of Albania’s second tier banks has relationships with counterparties and correspondent banks which require strict Know-Your-Customer procedures, and strict Anti-Money Laundering regulation.  
Should this fiscal amnesty draft open the door for individuals to deposit money into Albania’s retail banking sector without going through proper procedures to determine the original source of funds, these international counterparties would be forced to potentially cut relations with Albanian banks, or be subject to international penalties themselves. Will banks such as Credit Suisse, JP Morgan Chase or Deutsche Bank maintain relationships with Albanian correspondents that allow a lack of KYC/AML enforcement that would accompany this draft law? Albanian banks risk much if such a draft were to be implemented. 
Critics have suggested that the law, if implemented, would only provide a short-term boost to tax revenue. 
Albania may be under some fiscal pressure, due to arbitration judgments and increasing direct or indirect obligations due to Public Private Partnerships; however, a short-term boost via the proposed scheme will not solve these systemic problems. Historically in Albania the tax benefit of such fiscal amnesty schemes has proven to be limited. 
Is there a legitimate path to tax relief for international Albanian individuals theoretically participating in this scheme? The idea that Albanians living in the EU would not pay taxes in the country where the funds were earned, but would repatriate the funds to Albania in order to bring the funds into the banking system through the back-door, has not been welcomed. The EU has condemned the law and the media reported that both the German and French Ambassadors got up and walked out of the conference with the Prime Minister during his comments on the issue. 
The current leadership of the American Chamber of Commerce has correctly come out in opposition to this draft law. From a tactical tax perspective, this law would have no positive benefit on Albanian-Americans or US Green Card holders. If an Albanian-American dual citizen or US green card holder would try and take advantage of such a law in Albania, importing undeclared cash generated in the US upwards of two million 
EUR, such a person would have exposed themselves to a number of legal issues in the United States, 
irregardless of Albanian law.  
Americans and US Green card holders are subject to global taxation based on citizenship (or residency via holding a US Green Card). Based on current Foreign Account Tax Compliance Act legislation, any banking operations involving US citizens and Green Card holders are subject to be reported to the US Internal Revenue Service by the local banking sector. Failure to do so can result in crippling fines and cause difficulty for financial institutions to transact in the US dollar market as well as with US financial intermediaries. Given the lack of a double taxation treaty between the US and Albania, the individual taking advantage of the Albanian proposed law would risk having the entirety of the amount deposited in any bank in Albania be subject to full taxation and penalties in the US on top of the Albanian tax paid.  
Even if US citizenship based taxation did not exist in the United States and a double taxation treaty was in place, transactions of that size would almost immediately raise questions regarding undeclared cross-border money transport. Additional questions would be raised as to the source of the funds, which goes back to the issues raised by cynics of this draft law. 
There is a real question as to whether this draft law provides legitimate upside. What isn’t in question is that the draft law is fraught with downside. A doctor will take the Hippocratic Oath, stating that one would first 
‘Do No Harm’. It would be good for economists and politicians to take the same oath and develop legislation accordingly and abandon this draft law. / ADN 
*Mark Crawford is former Chair of the American Chamber of Commerce in Albania