Friday, November 28, 2008

The Flat Tax Spreads to Albania

June 6, 2007

By Alvin Rabushka

On May 30, 2007, Albania’s parliament approved a 10% flat tax on personal and corporate income. Based on its success throughout Central and Eastern Europe, Prime Minister Sali Berisher has been a strong supporter of the flat tax. The government hopes to implement the 10% flat tax on personal income by July 1, 2007. It replaces the previous system of five rates, 5% on monthly income between 14,000-40,000 leks ($1=91.62 ALL), 10% between 40,000-90,000 leks, 15% between 90,000-200,000 leks, 25% between 200,000-500,000 leks, and 30% over 500,000 leks. Dividends received by individuals remain taxed at 10%. The 10% tax also replaces the small business tax rate of up to 30% that applies to individuals.

The 10% corporate income tax replaces the current 20% rate on profits.

The Albanian government stated that its enactment of a 10% flat tax was intended to create a friendlier investment climate, make the economy more competitive, attract foreign direct investment, encourage the legalization of the shadow economy, and simplify tax collection.

No comments: