Albanian government approves 10% flat tax


Advocates of the move say it will attract investors, reduce tax evasion and encourage the legalisation of the "grey economy".

By Jonilda Koci for Southeast European Times in Tirana – 04/06/07


Albanian Prime Minister Sali Berisha has been a staunch supporter of implementing the flat tax. [Getty Images]

In a move aimed at creating a friendlier investment climate and making the economy more competitive, the Albanian government approved a fiscal package last week that includes implementing a 10% flat tax -- the lowest level in Southeast Europe. Corporate taxes will also be slashed to 10%.

"The fiscal revolution, including the regulatory reform, will be faster then forecasted -- increasing GDP and exports," Prime Minister Sali Berisha said after the laws were approved on Wednesday (May 30th).

Advocates of the move say it will bring many benefits. In addition to attracting Foreign Direct Investment, they say, it will encourage the legalisation of the shadow economy and simplify tax collection. Economic activity increases, and so does honest reporting of income, while tax evasion drops.

In countries that have implemented a flat tax, the results show steady or increased tax revenue within the first year, according to Adriatic Institute for Public Policy President Natasha Srdoc-Samy.

Critics, however, say the changes will mainly benefit businesses and the affluent, have little impact on most Albanians, and punish the poor. With the abolition of a progressive tax system, they say, low-income earners will see their taxes go up, while a tiny number of high-income earners will enjoy a windfall.

Meanwhile, cutting the corporate tax in half will drain the state’s budget, as the income from this tax currently makes up about 8% of total revenue, critics argue.

Related Articles


As part of the fiscal package, the government also approved a law that bans cash transactions of more than 2,228 euros for businesses. Approved cash transactions will be limited to 10% of a company's total transactions during the taxable period; or 10% of the total turnover of the business.

The laws are a "fundamental condition in the fight against informality and for the further consolidation of the banking system", Berisha said, adding that the initiative "will contribute to the fight against money laundering".

The government hopes to implement the legislation by July 1st, with the exception of the corporate tax reduction, which will be implemented January 1st, 2008.

The Democratic Party-led government has already instituted various tax reductions during the past two years. The most important of these was the reduction of social security contributions from businesses, from 29% to 20%, and a lowering of taxes on small businesses.

This content was commissioned for
  • Email to a friend
  • icon Print Version
  • Share/Save/Bookmark

We welcome your comments on SETimes's articles.

It is our hope that you will use this forum to interact with other readers across Southeast Europe. In order to keep this experience interesting, we ask you to follow the rules outlined in the comments policy. By submitting comments, you are consenting to these rules. While encourages discussion on all subjects, including sensitive ones, the comments posted are solely the views of those submitting them. does not necessarily endorse or agree with the ideas, views, or opinions voiced in these comments. welcomes constructive discussion but discourages the use of copy-pasted materials, unaccompanied links and one-line slogans. This is a moderated forum. Comments deemed abusive, offensive, or those containing profanity may not be published.

SETimes's Comments Policy

Focus on Ukraine


Region, Turkey optimistic about new EU leadersRegion, Turkey optimistic about new EU leaders

Regional officials say the recent personnel changes in the EU will have a positive impact on their countries' relationship with Brussels.

SETimes logo

Most Popular



Should Greece change how it handles illegal immigrants?

I don't know