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Petanaj Migena,
Ph D., University "Ismail Qemali" Vlore, Albania
Department of Finance E-mail: [email protected]
Durmishi Veronika, Ph D., University College "Pavaresia" Vlore, Albania Dean Faculty of Economics and Social Sciences E-mail: [email protected]
THE EFFECT OF TAX REDUCTION IN TOURISM AND THE DEVELOPMENT TRENDS OF THIS SECTOR IN ALBANIA
Abstract: Tourism today is one of the largest industries in the world, creating more j obs than most other sectors. The sites that are in the early stages of tourism development, such as Albania, have the potential to benefit from tourism, especially in the reduction poverty and economic growth.The main purpose of this paper is to show that the government with the new fiscal package for tax reduction in tourism contributes to the sustainable development of this sector and to the full formalization of the tourism sector as a strategic sector for the country's economy.
Keywords: tourism economics, fiscal packages, tax reduction, tourism sector formalization, tourism investment.
Introduction
After the 2000s, our country is making many efforts to master a stable political and economic situation, but still in the country there are conflicts and very important issues to be resolved. There are already premises for a diverse tourism development not only in group but also individual and family organization. Also in the programs of political parties and governments, the development of tourism development plans as the primary development branch in the country is central to the country. To achieve a higher development, stronger co-operation between central and local government is needed, but not there remain also individuals who deal with this field. Tourism would not be considered as an important economic sector, but as an ideological sector, which would limit both qualitative and quantitative aspects [1].
Tax reduction in tourism, a factor determining the full formalization of this sector
The Law on Tourism and the Government Program 2015-2020 present clear priorities for the development and promotion of tourism as well as for the improvement of infrastructure, development and promotion of rural and mountain tourism. Existing law, despite attempts to give definitions in the field of tourism, had deficien-
cies in their content and lacked important definitions in the field of tourism. Also, the existing law did not clearly provide for the division of competencies of the respective institutions in the field of tourism and, many cases, there were overlapping or ambiguity about them. The current law on tourism did not foresee the licensing of tour operators, which resulted in a poor and standardized service to the detriment of the consumer and, at the same time, significantly influenced the increase of informality. Also, the current tourism law did not foresee categorizing and classifying accommodation structures. The absence of this process has brought a chaotic situation to the hotel market. Accommodation facilities use distinction marks (stars) that do not conform to the real standards of the structure or the level of service they provide. The Albanian government approved the Draft Law on the Reduction ofValue Added Tax (VAT) for accommodation structures in tourism, from 20% to 6%. This bill aims to promote the development of the tourism sector, increase competition and economic development [6].
In the European Union Directive no. 2006/112 / EC "On the Common System ofValue Added Tax", in Annex 3, defines what are the areas under which reduced VAT rates can be applied. Thus, this Annex stipulates that one
from areas where reduced VAT can be applied is accommodation at the hotel and other similar services. The directive stipulates that the minimum VAT reduced rate is 5%" [3]. Currently, 22 EU member states apply a reduced VAT rate for hotel accommodation and 20 of them apply a rate of less than 10%. Four-star and five-star hotels will not pay a profit tax for a 10-year period if manage to benefit from special status. The effects of the exclusion begin at the moment of the economic activity of the accommodation structure, but no later than three years from the receipt of the special status. The growing contribution of the tourism sector to income and employment in the last three years, culminating in 2016 with 1.5 billion Euros of revenue in the state budget, is one of the main reasons for which the Albanian government undertook the initiative to promote the sector, aiming not only to further increase it through the promotion of investments, but also the formalization and increase of tourism VAT revenues. Reducing VAT in the tourism sector brings us to competitive levels across the region, but also with the philosophy of the countries with a strong tourism-based economy, in support of this sector, with a VAT lower than VAT, is traditional and it happens in all the countries of the region, in Greece, Montenegro, Croatia, and Italy and France. Macedonia applies a 5% VAT tariff, Serbia 10%, Montenegro 7%, Greece 6.5%, Kosovo applies reduced VAT tariffs, so it was time for Albania to apply a reduced tariff in the sector tourism [2]. Reducing VAT on tourism will not have a negative effect on the income of this sector but will expand the tax base in tourism. Reducing VAT directly stimulates the development of a country's strategic sectors. Reduced VAT encourages consumption and because of the size growth of the economy does not affect the budget revenues.
Tourism Development Trends in Albania
Albania is recognized as a safe tourist destination of great value, characterized by a unique diversity of natural and cultural places of the world that are within a relatively small geographic area, which is managed in an environmentally responsible manner and social, which is easily accessible from European tourist markets. The development of tourism in Albania relies on the principles of sustainability. Sustainable tourism is defined as: Tourism that fully takes into account current and future impacts in the economic, social and environmental spheres, addressing the needs ofvisitors, industry, the environment
and host communities. The development of sustainable tourism is undergoing continuous and requires constant monitoring of the results, taking necessary preventive or corrective action when necessary. Over the past few decades, Albania has conducted a disoriented, aggressive tourism and a short period of just two months and this short-term race pushes hotels not to pay taxes and hide profits. Albania has currently declared only 68 thousand beds, as much as Macedonia, but the rest is not declared. Homes and villas that are issued for tourism have left the state out of control, but now a reassessment of the real situation of tourism is being made. In the countries of the region tourism gives 10-20 percent of annual national production, while in Albania it is up to 6 percent. This is pushing the government to make the teaching and standardization of tourist facilities. Meanwhile, tourist packages are re-evaluating Albania, utilizing the country's transit route to different countries.
According to official data, the highest number of foreign nationals entering Albania in June 2017 results from Kosovo with 31.0%, followed by foreigners from Macedonia with 12.1%, Greece with 9.2% and Italy 7.5%. The entry of foreign citizens month after month recognizes an increase in Albania and ground routes constitute the greatest share of the passenger movement. According to the data of the Albanian Institute of Statistics only in June 2017, road entry occupied 76.9% of the total weight ofthe movement while the airway inflows reached 14.7% and the seas amounted to 8.4%. The number of foreign visitors entering Albania for holiday purposes and daily visits in June 2017 was 207,972, while in June 2016 this number was182, 606 with an increase of about 13.9% in 2017. [4] The heavy traffic on the streets the country has also increased the risk of road accidents. Regional co-operation within the Berlin process, peace, stability in the region and reforms have spurred the development of tourism in recent years. In Albania, tourism entered this year with a contribution of 7% to Gross Domestic Product and employment of24% of total labor force in Albania. Albania, according to the World Trade Tourism Center, is now ranked 4th in the world for the level of employment in the tourism sector. Only last year Albania visited more than 4 million and 700 thousand tourists, which represents an increase of 15% compared to the previous year. Last year's tourism brought the economy 1.5 billion Euros in revenue, an increase of 38% compared to 2013 and 13% compared to 2015 [4].
Tourism development trends in Western Balkan countries
At a time when world tourism has developed for decades, the attention of many vacationers has attracted curiosity to the new tourist destination of the Western Balkans. Tourism has been identified as one of the most important sectors in the economic development of the Western Balkan countries, (Bosnia and Herzegovina, Kosovo, Montenegro, Macedonia, Serbia and Albania) and its development strategies lie at the top of the priorities of the respective governments. Through the growth of tourism it is possible to expand the labor market and increase the level ofliving. Economic growth remains one of the basic criteria within the common goal of the region for integration into the European Union. The Balkans out of wars is now in peace and security and has a unique chance to show the world an uncharted region that thinks to have a common development towards the EU. Thanks to the Berlin Process, the entire region has been included in what is called the Balkan Liaison Proj ect, where we aim to open trade borders, road borders and energy to foster economic development. At the Saraj evo Summit 2017, the Western Balkan countries signed a pact for the creation of a joint regional market including the tourism sector. We are trying to concretize the projects and ideas of the Berlin Process presented at the Vienna Summit in Paris and prepare for the Summit of Trieste - in July of this year. We intend to increase cooperation to increase and diversify regional tourism products, emerging in the global market of global tourism as a common market.
Currently we have two Balkan tourist products: Via Ignatius and Via Dynamical, which connect Western Balkan countries to a single tour. There are also GIZ's projects to build what is called the "Balkan Peak" that moves between three countries, Albania-Kosovo-Montenegro. Many tour operators in the region offer tour packages that include several states: Kosovo, Macedonia, Montenegro and Albania ".No one from Asia and mostly from Japan does not come from so far in the Balkans to visit a single country. But comes if you visit the whole region
offering touristic packages along the coast of Albania, UNESCO protected towns, the mountains of Montenegro, the tourist attractions of Serbia etc. At the tourism fair in Tokyo, they will present joint tourism products as a single regional market: Albania, Macedonia, Montenegro, Serbia, Bosnia and Herzegovina [5].
Conclusions
Tourism would not be considered as an important economic sector, but as an ideological sector, which would limit both qualitative and quantitative aspects. Albania is almost 70% untouched and the fact that no hotels and resorts are being built indicates that it is a penalized industry, for the sole reason that it is a risky industry. Mostly the tourist industry, almost 70% of the investments are hotels and resorts and these are investments that have a risk, and the risk is political and economic. Tourism investments have a very large depreciation: they have very long self-sufficiency and certainly will stimulate the state, stimulating those who invest in this sector. One of the main problems is the problem of land ownership that hinders important tourism investments. Tax reduction in tourism will bring revenue growth and formalization of this sector to the country's economy.
Recommendations
The public sector at central and local level should find the opportunities for private initiatives for tourism development to provide financial and institutional support. The private sector should be more organized and increase its impacts on the public sector, in order to increase institutional support through the development of strategic documents for sustainable tourism development. The private sector is not enough to focus solely on capacity expansion, but investments should also focus on the development of human resources and the provision of an attractive touristic offer for tourists. Local community should be an integral part in important decision-making processes for tourism development. The local community, through cooperation with the public and private sector, should make its contribution to the development of sustainable tourism.
References:
1. UNDP, REC: Regional Development Strategy, Millennium Development Goals - 2005 a.
2. Zak Topuzi "World Today", August - 2015.
3. Holland J.'Consensus and Conflict: The Socioeconomic Challenge facing Sustainable Tourism Development in Southern Albania', in Journal of Sustainable Tourism, 8 (6). - 20005.- P. 10-524.
4. Institute of Statistics, Albania.
5. The World Travel and Tourism Council.
6. Ministry of Finance, Albania.
