The new fiscal package, presented by the government as a policy to ease taxes and reduce the cost of living, is turning out to be a maneuver that gives to citizens and businesses with one hand, while taking back with the other, through new taxes and increasing existing obligations.
At the heart of this maneuver is the removal of the 27 lek per liter circulation tax on fuel, a measure that should theoretically reduce the price of diesel and gasoline by 32.4 lek per liter, including VAT. But the relief is accompanied by a doubling of the annual vehicle tax, an expansion of the categories that will pay, and an increase in VAT from 20% to 21%.
The Minister of Finance, Petrit Malaj, presented the package as an intervention with a neutral effect on the budget, based on three principles: "Redistribution of income; Strengthening fiscal justice; Improving the efficiency of the tax system."
But the Ministry of Finance's own figures show that behind this redistribution lies a genuine compensation maneuver, where the reduction of one tax is accompanied by the increase of several others.
340 million euros removed from oil, returned to cars
According to the draft law, the abolition of the turnover tax will cost the budget about 31.2 billion lek per year, or approximately 340 million euros, including the VAT that was applied on this tax.
But at the same time, the government expects to secure 26.6 billion lek in additional revenue from vehicle taxation, or about 290 million euros.
For cars with cylinders up to 2,000 cm³, the annual tax will be doubled. A ten-year-old diesel vehicle, which currently pays 6,000 lek, will pay 12,000 lek. For cars with larger engines, the increase will be even higher.
The taxation scheme will also include vehicles up to three years old, which are currently exempt. Electric cars will pay 15,000 lek per year for the first time, while the annual tax for luxury vehicles will increase from 21,000 to 40,000 lek.
So, the tax that is removed from the gas pump will be largely returned to the car owner's annual bill.
VAT increases, a tax on oil is also added
While the government promises to reduce fuel prices, it simultaneously proposes to increase the standard VAT rate from 20% to 21%.
This increase will affect a wide range of goods and services, including fuel. According to Monitor's calculations, the budget could benefit from an additional 15 to 20 million euros per year from the increase in VAT on fuel consumption alone.
The price of fuel is also expected to reflect a new obligation for oil reserves, estimated at at least 3 lek per liter, with an annual cost for consumers of approximately 30 million euros.
Thus, the reduction in sales tax is offset not only by vehicle taxes, but also by other duties that burden consumption.
Dividend tax increases, VAT base expands
The maneuver is not limited to vehicles and fuel. The fiscal package foresees an increase in the dividend tax from 8% to 15%, almost doubling the obligation on profits that companies distribute to partners and shareholders.
Another change is the reduction of the VAT registration threshold from 10 million to 5 million lek annual turnover . This means that more small businesses will be included in the VAT scheme, facing new administrative and tax obligations.
The government has also proposed reducing VAT to 6% for 54 basic basket products, a measure that could ease food spending. However, the real benefit to consumers will depend on the tax cut being reflected in sales prices.
Relief that doesn't cost the government much
The Ministry of Finance acknowledges in the report that the changes aim to "redistribute the tax burden and compensate for the negative effects on budget revenues resulting from the abolition of this tax."
From the shift in sales tax alone, the projected balance is a net loss of about 5 billion lek for the budget. But this calculation does not include all the additional revenues that could be generated from the increase in VAT and other changes to the fiscal package.
Practically, what the government is doing is simply changing the way it collects money, shifting the burden from one tax category to another. But it itself has not given up a single lek.
