The Head of Mission of the International Monetary Fund (IMF), Anke Weber, spoke about the new law "On Income Tax", which since January of this year has also included free professionals in the scheme, while from 2029 they will be included also small businesses.

Weber in an interview for Monitor stated that the previous income tax regime revealed some important shortcomings. “Albania has made significant strides in recent years with its efforts to protect fiscal sustainability, which is essential for macroeconomic stability and sustainable growth. The prudent fiscal policy has led to a continuous improvement in the fiscal position of the government and also a continuous decrease of the public debt about the GDP, which now remains below the levels of the period before the pandemic," declared Weber.

Regarding the new Income Tax Law, Weber said that different thresholds for employment income and business income resulted in a confusing tax structure, with stronger incentives for taxpayers to declare their income as income from business activities.

This loophole was an unintended consequence of the difference between how employment and business income are taxed and created an unfair situation for other employees, she noted.

Weber emphasized that to address these issues the Income Tax Law was amended, with IMF technical assistance and support, to ensure that freelancers will be taxed comparably to other employed taxpayers.

But, she adds that the experience with the implementation of the new income tax law highlights the challenges that may arise and hinder the smooth and timely implementation of the reform measures. This underscores the need to continue progress with revenue administration reforms, which typically require a long time and strong coordination between different implementing agencies.

The IMF chief said the pace of revenue administration reforms needs to be accelerated, particularly regarding a strategic plan for the General Directorate of Taxes and improving the collection and use of data to help strengthen compliance, particularly in the case of the tourism sector and wealthy individuals.

Weber pointed out that progress has also been made in revenue administration. For example, the successful implementation of fiscalization, where businesses now electronically report transactions to the tax administration, has improved transparency and revenue collection.

"There is still room to go further. As discussed in the 2023 IMF Article IV consultation staff report, further rationalization of VAT rates, exemptions, and limits would improve revenue collection and efficiency," Weber stated. For the IMF representative, the Mid-Term Revenue Strategy must be finalized and approved as soon as possible. "This is particularly critical in the context of Albania's membership in the European Union and wider compliance with EU standards," she added.