14 Jun 07
New Social Security, Income Tax Scheme for Albania
Tirana_ A new social security and income tax scheme, approved by the government in May among strong opposition from the business community, went into effect on Thursday, catapulting wages in Albania virtually from one of the lowest in the region into the European mainstream.
According to the new law, businesses operating in the country will have to pay social security contributions and income tax under new criteria, which substantially raise wages for most categories of employees.
The government says the new law is an action in the right direction to fight informality and bring wages to real levels. Minister of Finance Ritvan Bode, in a meeting with the representatives of the American Chamber of Commerce, said that many businesses were declaring “low wages for their employees to avoid income tax and social security contributions.”
“The government sees this as part of its fight against informality in the economy,” said Bode, hinting that other measures will follow.
However, interest groups like Konfindustria, Albania’s largest union of manufacturers, have described the new law as out of touch with reality, arguing that the levels of wages that the government has imposed on business far exceed what employers pay and what the market can actually afford, raising costs and making Albania unattractive for foreign investors.
Some opposition MP’s who are against the law have also argued that the government is trying to make up for the reduction in revenues after Albania brought down customs barriers with the European Union, a provision of the Stabilisation and Association Agreement which was signed last year.