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DOI: http://dx.doi.org/10.20534/EJEMS-17-3-45-48
Dr. Mikel Alla, Accounting Studio & Tax Consultancy University of Elbasan, Albania E-mail: [email protected]
COMPARATIVE ANALYSIS OF VAT IN ALBANIA AND OTHER BALKAN COUNTRIES
Abstract: VAT represents the most important tax on sales in the Balkan countries, with the largest share of revenues in these countries' financial budgets, which varies between 20% and 30%. The study aims to make a comparative analysis of VAT in Albania with other Balkan countries. Bosnia & Herzegovina has a specificity regarding tax administration, enabling a modern and functional union of the customs and tax administration in a single institution, enabling better administration, control, auditing and investigation to ensure a better protection of public income. Referring to the experience of EU and Balkan countries, due to the possibility of EU integration and revenue growth, Albania should look at the possibility of extending the taxable base by reducing the threshold. Referring to the experience of the EU and the Balkan countries, due to the possibility of EU integration and revenue growth, Albania should look for the opportunity of taxation through a reduced rate of excluded activities such as; trade of pharmaceutical products and health services, as such activities have a high profit rate. Fiscal policies in Albania should promote domestic production and the sector of services, in order to increase the VAT index collected domestically. As the tax system of these countries relies on the principle of self-assessment, the new changes in Albanian fiscal legislation that extend the term of self-regulation of the financial situation within 3 years is a good recommendation for other countries taken in analysis.
Keywords: VAT, tax system, tax legislation, Balkans.
Introduction for tax assessment to be made by the tax authori-
For the first time VAT is designed by a German ties. The year 1954 is recognized as the year when entrepreneur. Dr. Georg Wilhelm von Siemens has the Modern VAT was presented for the first time. proposed for the first time the concept of VAT in VAT revenues depend on the taxable base, the rate 1918 for large businesses. His purpose was to avoid of taxation, but also on the effectiveness of its admin-the effect of the "tax on tax". In 1920 Thomas S. Ad- istration. The taxable base is determined by the VAT ams suggested VAT as an indirect taxation on busi- model applied and by the way it is calculated. The nesses, which would replace income tax in US cor- Law in Albania sanctions the standard tax rate of porations. In 1954 (10.04.1954) "Maurice Laure" 20%, which applies to most goods and services and implemented indirect taxes on consumption, which does not apply differentiated VAT rates for sectors was called VAT. His idea was implemented immedi- of community importance, except the 6% rate that ately because this taxation method entitle taxpayers will be applied by dt. 01.07.2017 for tourism sector. at all levels of the manufacturing process to adminis- Also, in the VAT legislation, a number of exemptions ter and calculate the tax themselves instead of asking from VAT are envisaged, which increase the regres-
sive effect on taxable income, such as; education, trade in pharmaceutical products, health service, newspaper trade, books etc. Numerous studies have concluded that the application of a single standard tax rate and a one or two reduced rates, with fewer exceptions and a broader taxpayer base, is more efficient than applying some tax rates and many exemptions to activities. The application of some tax rates and many exemptions may have a regressive effect on the realization of income through the reduction of the taxable base. EU experience introduces us a complicated management model with many reduced rates and many exceptions that aspirants to integrate into the EU are difficult to implement this model.
Purpose and methodology of the study
The aim of the study: The study aims to make a comparative analysis of VAT in Albania with other Balkan countries.
Hypothesis: The VAT model applied in the Balkans differs considerably from one country to another, despite the approximation with the EU's 6th Directive.
Methodology. The paper will be based on literature research in Albania and other Balkan countries for the tax system and VAT, as well as analysis of their fiscal legislation using comparative analysis.
Comparative analysis of vat in balkan countries
Albania is the first country that has embraced VAT in the Western Balkans countries. Meanwhile, in the analyzed Balkan countries, Greece is the first country that has embraced this form of taxation. VAT in Greece was impounded in 1987, followed by Romania in 1993, Albania in 1996, Croatia in 1998, Slovenia in 1999, Macedonia in 2000, Kosovo and Montenegro in 2001, Serbia In 2005 and Bosnia&Herzegovina in 2006.
Bosnia&Herzegovina has a specificity regarding tax administration. ITA in Bosnia&Herzegovina represents a modern and functional union of customs and tax administration in a single institution enabling better administration, control, auditing
and investigation to ensure better protection of public revenue. The organizational and functional structure of ITA is rare in Europe.
Greece has the lowest threshold for VAT registration (EUR10,000), followed by Macedonia (EUR16,200) and Montenegro (EUR 18,000). The highest threshold applies to Serbia at a level of EUR66,500, followed by Romania with a threshold of EUR65,000 and then Kosovo and Slovenia with a threshold of EUR 50,000. Albania has a registration threshold of EUR 35,714 (ALL5,000,000) followed by descending order from Croatia (EUR30,500) and Bosnia&Herzegovina (EUR 25,500). Following this reasoning, the highest standard of VAT applied by Croatia to the extent 25%, Greece 23%, Slovenia 22%, Albania and Serbia 20%, Montenegro and Romania 19%, Macedonia 18%, Bosnia&Herzegovina 17% and Kosovo 16% (in some cases 21%). Despite Croatia applying the highest rate, also applies reduced rates for some industries that have a significant impact on the public interest (5% and 13%). Greece also applies reduced rates, and even the standard rate is applied as reduced to some special islands. Regarding the application of reduced rates, Kosovo and Macedonia follow almost the same fiscal policy (up to 7%), followed by Romania and Slovenia with 9% and 9.5%, Montenegro and Serbia at 10%. Albania (until 30.06.2017) and Bosnia&Herzegovina are the only countries in the Balkans that do not apply reduced rates except the 0% rate, which apply to almost all countries. These two countries apply only the standard rate respectively at 20% for Albania and 17% for Bosnia&Herzegovina. Applying the 20% rate for Albania, with 3% more than Bosnia&Herzegovina, is related to the highest census threshold, which translates into less taxpayers registered with VAT regime. From 1 July ofthis year Albania applies the reduced rate of 6% for the tourism sector.
Regarding the taxpayer's registration and deregis-tration, the taxpayer's concept for VAT purposes, the moment of supply, the billing moment, the place of supply, the method ofcalculating the VAT and the appeal rates of tax assessments, all Balkan countries that
are not part of the EU converge generally in the fiscal treatment of these issues, translated into their maths with Directive 6. One exception is Macedonia, which has a specificity. In Macedonia, taxpayers remain registered for VAT for at least five years after the VAT registration year. But Macedonian tax authorities may derecognise the taxpayer before the five-year period if: during one year the taxpayer submits tax declarations without activity; over two years he submits tax declarations without taxable supplies etc. Meanwhile, in Croatia, taxpayers who have not completed their activity during the previous two calendar years will be automatically removed from the VAT register.
The VAT payment deadline is a special feature of Serbia's tax system, which differs significantly from other Balkan countries. In the fiscal legislation of Serbia, taxpayers (turnover of less than EUR415,000) may postpone the payment of VAT until the receipt of receivable accounts, but no later than 6 (six) months from the date on which the VAT is declared as payable.
Regarding the right to VAT deduction, Albania and Serbia converge on the fact that the VAT paid for purchases of goods, assets and services on condition that serves only to taxable supplies, can benefit the right of deduction within 12 tax periods. While in Croatia this right can be exhausted within 3 years. In other countries, there is no specific definition of this issue, which may not have a certain deadline for deduction. Also in Serbia, according to fiscal legislation, for some expenses, the tax paid on them can not be deducted like; costs associated with the purchase and import of cars, expenses related to representation etc. Meanwhile, the basic principle in other Balkan countries and UE, aligned with European legislation is that VAT paid on purchases can be deducted if these purchases have served to taxable supplies. As the tax system of these countries relies on the principle of self-assessment, the new changes in Albanian fiscal legislation that extend the term of self-regulation of the financial situation within 3 years is a good recommendation for other countries under analysis.
A specific feature of Slovenia is that foreign businesses can claim the refund of VAT to the same extent as domestic businesses. Also Slovenia imposes the highest penalties for administrative violations, up to EUR125,000. Meanwhile, Croatia and Montenegro apply the highest penalties in Western Balkans compared to other countries. These penalties amount to EUR 28,800, but depending on the administrative violation, as a result of the resulting liability, the penalty may be much higher in other countries. The fiscal legislation of Bosnia&Herzegovina penalizes at the same extent the responsible person and the business.
From the results we conclude Bosnia&Herzegovina has the highest ratio of tax revenue, that has positively impacted the implementation of an efficient tax system. Croatia and Montenegro have a high tax s ratio is also a result of the developed tourism sector and the fiscal facilities that have been made available to this sector. Albania and Kosovo are the last.
EU countries have the ratio of VAT paid within the country above 70%, but reaches 90%. In other developing countries, this ratio varies up to 50%, while in Albania, varies in the range 23-25%. So saying figuratively, VAT in Albania is a "taxation of imports" rather than "taxation of consumption".
Conclusions
Referringto theexperience ofBosnia&Herzegovina, Albania should look at the possibility of concentrating tax administration with customs in a single institution, as this management tax mode is likely to improve the performance of the tax system.
Montenegro and Croatia (in second and third countries) have a high tax revenue ratio in the Balkans, as a result of the developed tourism sector and the fiscal facilities that have been made available to this sector. Due to the favorable geographic position, the development of this sector through the policy of differentiating the VAT rate to 6% applied by the Albanian government in 2017 is likely to improve the income ratio tax.
Referring to the experience of EU countries (Greece and Croatia under analysis) and Balkan
countries (Montenegro, Bosnia&Herzegovina and Macedonia), due to the possibility of EU integration and revenue growth, Albania should look at the possibility of extending the taxable base by reducing the threshold.
Referring to the experience of the EU and the Balkan countries (Serbia, Croatia and Greece), due to the possibility of EU integration and revenue growth, Albania should look for taxation opportunities through a reduced rate for excluded activities such as; trade in pharmaceutical products and health services, as such activities have a high profit rate.
Western Balkan countries, as they aspire to European integration, should look at the possibility of implementing the reverse-charge VAT scheme for cross-border trade by "imitating" European community
schemes, as facilitating policies in the group make the investment of serious capital more attractive.
Fiscal policies in Albania should promote domestic production and services, in order to increase the VAT index collected domestically.
Referring to the experience of the Balkan countries (Serbia, Bosnia&Herzegovina and Slovenia), Albania may look at the possibility of applying administrative penalties for the responsible person who commits administrative offense to business.
As the tax system of these countries relies on the principle of self-assessment, the new changes in Albanian fiscal legislation that extend the term of self-regulation of the financial situation within 3 years is a good recommendation for other countries taken in analysis.
References:
1. Law No. 9920 dated 19 May - 2008 "On Tax Procedures in the RA".
2. Instruction of FM, No. 24, dated 02.09.2008, "On Tax Procedures in the RA".
3. Law 92/2014 "On Value Added Tax", as amended.
4. Instruction of FM, No. 6, dated 30.01.2015, "On Value Added Taxes in the RA".
5. Tax laws of the Balkan countries taken in the analysis.
6. Directive 2006 / 112 / EC, "On the common system of VAT".
7. Worldwide VAT, GST and Sales Tax Guide - 2015, EYGM Limited.
8. Ebrill L., Keen M., Bodin J. P., Summers V., The Modern VAT - 2001, IMF.
9. Terra B., Kajus J., A Guide to the European VAT Directive - 2013, - P. 277.
10. Adams S., Fundamental Problems Federal Taxation of Income, Quarterly Journal of Economics, - Vol. 35, - No. 4, - 1921, - P. 553.
11. Alla M., "Comparative analysis of tax revenues among Balkan countries" at the XIII International Conference on Economic Sciences, Vienna, date 24.11.2016.
12. Alla M., "Possibility of Creating a New Regime of Cross-Border Supplies of Goods in Albania and Balkan Countries", published in the IJEAR, Romania, EU - Vol. IV, - Issue 9 / December - 2016.
13. Branka T. P., "Characteristics of Value Added Tax in Bosnia and Herzegovina", MCSER Publishing, Rome-Italy, - Vol 6. - No. 2. - P. 2, March - 2015.
