ECONOMY ON FOCUS: Zero taxes, 30.000 lek minimum wage rate, double economic welfare payment

Weekly press conference focusing on economy:

Prime Minister Edi Rama: On the today’s weekly forum on economy, we would wish to focus on three very important aspects, which I believe represent three main cornerstones for our third term in office and our ongoing efforts and work amid an extraordinary situation, which affected Albanians earlier that it affected other nations across the world. We have to cope with a devastating earthquake, which in just few seconds left thousands of families homeless, destroyed dozens of schools and forced us to fundamentally review and overhaul our priorities and mobilize a massive funding in an unexpected direction, the post-earthquake reconstruction programme.

The invisible enemy arrives shortly after, hitting hard the economies of every country, significantly impacting the economic activity of small and big business stakeholders, dictating the demand decline, severely hitting the supply chains and the money influxes.

We have been strongly, courageously and boldly coping with the two disasters and what I am really proud of our work is that not for a single moment have we left those exposed to these two disasters, the families that are gradually and constantly returning back the newly-built homes, and many other families waiting to return to their new apartments soon, while currently housed in rented houses under the government’s rental assistance programme.

For all categories involved in economic activities, mainly the tax cut on small business is an important milestone on our path to the future and constitutes one of the most significant aspects of great change in approach; the big change in terms of actions and the big change in relation to the other party that is proposing reinstatement of the flat tax rate, threatening in fact the weakest with their pledge to bring back the time when 100% of businesses were paying a 10% profit tax and VAT rate.

Today, around 91% of the businesses pay zero profit tax and zero VAT, whereas only 9% of them, I mean big businesses, pay a 15% profit tax rate.

This 91% includes over 111.000 businesses and around 300.000 employees who have been totally relieved of the income and profit tax. It is a step that puts Albania specifically a step ahead of entire region, and I am not considering Europe since tax rates in Europe are incomparably higher than the rates applied in this area and businesses with an annual turnover up  to 114.000 euros pay no taxes at all.

Second, but not in terms of importance, is the minimum wage rate, which we have increased to 30.000 lek and our ambition is to increase the minimum wage each year. What we will be broadly discussing the rest of our program in the upcoming phase of this term in office, when we will unveil our vision for Albania 2030 and our action plan for the period 2021 and 2025.

The 30.000 lek minimum wage rate is not a final destination, but merely a station along an ongoing long road and of course it is not a laudable amount, quite the contrary it is a challenging salary, both for the entities benefiting from this wage rate, and for us who are seeking to increase their income. But we have made significant progress in this aspect compared to where we used to be.

The minimum wage in 2013 was 22.000 lek, and if we are to deduct the social and health insurance contributions, the monthly salary workers used to receive back then was absolutely unacceptable. The minimum wage today is 30.000 lek.

I must tell all those who are beneficiaries of this minimum wage that they should see this as a process and as a station on an ongoing path and not as an arrival destination. It is our ambition to further increase the minimum wage and, just like we have already succeeded – thanks to the efforts all over these years – in scrapping the profit tax on small businesses, exceeding our pledges thanks to the opportunities we have so quickly created, we are also seeking to gain a special position in the regional ranking regarding the minimum wage too.

We have increased twice as much the economic welfare benefit and it will remain as such until the war against the invisible enemy is over. In the meantime, we will seek to establish a definite double economic assistance even after this war is over.

Those positively assessing our performance during the second term in office and wants to render an objective judgement shouldn’t forget for a single moment that this has been the most extraordinary challenging term an administration has been serving since the cabinets in Albania are elected and not appointed by the monist system. This is because the second half of this term in office has been marred by our war against two incredible natural disasters. Just like we are gradually emerging victorious from the war against the huge disaster, the earthquake and its aftermath by healing the earthquake wounds step by step, we will emerge victorious from this global war too, where we hold our position along this whole global front against the invisible enemy and the aftermath of the pandemic. I am very aware that this is a key moment in this war and inextricably depends on vaccination.

Taking notice of what is going on in several countries, which because of their power, because of their favourable position vis-à-vis the vaccine supply source – and I mean namely Israel and Great Britain, two countries which are optimistic and are seeing a light at the end of the tunnel thanks to the vaccine rollout, with Israel having already vaccinated half of its population and Great Britain having vaccinated an impressive number of people – it is obvious that the vaccine is an irreplaceable weapon in the efforts to break the infection chain and turn the country into COVID-19 free for the population. What is happening in the two countries is really inspiring, with Israel planning to take steps towards constant reopening after having broken the infection chain and after having made a triple advanced payment,  like no other country, for the Pfizer and Moderna vaccines, while the vaccines were yet to be developed. So, without waiting first for the vaccine to be approved and become functional, Israel bet extremely big. And today, like no other country, Israel has secured everything it needs to vaccinate its population. Great Britain is actually the country where one of the COVID-19 vaccines was born and was advantaged by launching an intensive vaccination rollout and today it possesses the whole amount of doses it needs to finalize the immunization programme and the British Prime Minister announced a day ago plans to reopen stadiums with 10.000 seats in April and final reopening of all stadiums, despite their size, in June, and such a move would represent a moment of triumph.

This is why I have my heart and soul into communicating with my friends as part of the efforts to secure a quantity of vaccines doses that would allow us to usher in an intensive vaccination rollout and a final phase of this war, so that we become relieved from this nightmare and this enemy that keeps claiming people’s lives every day and it is only the vaccine that will ultimately repel it. Just like we succeeded in securing the Pfizer vaccine earlier that an overwhelming majority of other countries in the region, which have still to reach a deal on the vaccine deliveries, and just like we started the process and we will complete vaccination of all health workers within second half of March, we will launch the mass immunisation process very soon.

It is just a matter of a short, rather a long time.

I can’t provide details, but we are close to reaching a deal.

I am very sorry I can’t fully confirm it now and I am looking forward to doing so very soon. Thank you very much!

I would like to briefly focus on these displayed charts. First, take a look at the chart that totally brings down the propaganda alleging that the small businesses are closing across the country. And we are not talking about an easy year, but we are talking about 2020, the year of the pandemic and the end of 2020 and not January 2020. A total of 60.000 small businesses were operating in 2013, compared to 110 428 small businesses in 2020. I believe this is a very significant figure, indicating how much the clear support for small business has worked and how small business has helped to generate employment and self-employment.

This way, small business has been given a strong fresh impetus, which we are convinced will be reflected by end of this year and in the coming years not only through growth in number of new businesses, but also in the number of employees.

Another issue I would like to highlight is the relation between this government and the rich people, the contribution of the wealthiest people, or the so-called oligarchs, whose contribution to the state budget in 2013 is shown by this charts. And we are not referring to 2020, as you all know quite well it was a year of anomalies, yet the government provided relief to everyone. The contribution of the wealthy businessmen or big businesses to the state budget has increased by 142%. Take the last column and calculate the figures if a 9% flat tax rate is applied and you would find out how much money would end up in the oligarchs’ pockets if the party that talks about the so-called oligarchs during the daytime and flirts with them during night time.

The third chart I would like to bring to your attention is the progressive taxation on the personal income tax. Take a look to see how the tax rate has been cut and the incomes have increased. A decline was noticed initially, but the incomes of the individuals have kept increasing then, as it can’t happen otherwise. Since they claim that state budget collections would increase if a flat tax system is applied, I would say that the flat tax system affects mostly those who earn less. The flat tax would affect you, but it would support your employers, your TV owners. You would pay more in personal income taxes than the owners of the TV channels where you work. This is because a 9% tax rate is much higher than the rate applied to their salaries. It is as simple as that.

It is universally known that the flat tax system favours the rich, whereas the progressive tax, the fair taxation system favours the overwhelming majority of people. The flat tax supports those who earn more, and it hits hard those who earn less. Those who earn less account for around 97% and they would be hit hard by the flat tax system. While honest taxation, progressive taxation, our taxation system supports you more than them.

We won’t raise taxes on big business, but we won’t decrease taxes on big businesses either. The big businesses seeking tax cuts should not vote us, because we don’t plan to cut taxes on them. But we will not raise taxes and they won’t have the flat tax rate that was imposed on them in 2013, and they know quite well how much they used to pay in bribes to those who governed the country.

-You have pledged to review the personal income tax rate applied to various wages, yet you haven’t clearly stated whether such a decision would be made in 2022 or in 2023.

-During your public communications either with the citizens or the media, you rarely mention the Democratic Party leader Lulzim Basha, while addressing your negative campaign against the President Meta or the Socialist Movement for Integration. Is this a tactic to sow division among the extra-parliamentary opposition or are you hinting an open door to Lulzim Basha after the April 25 elections?

PM Edi Rama: As far as the minimum wage, the changes to the personal income rate for various categories of wages and a series of other measures are concerned you should wait for while until we unveil our vision for Albania 2030 and the Action Plan 2021 and 2025. I believe this will happen as soon as we will send our team on the ground.

I have no comments to make regarding the second question. I don’t want to waste time by commenting on it.

–Yesterday, you invited the opposition to find a common way on how to hold the electoral campaign in order to avoid mass gatherings. Has the Socialist Party a concrete proposal on how to find a solution and avoid such gatherings, helping this way to prevent further spread of the infections in the country?

– Will you adopt an initial plan for the businesses that would be affected by the extension of the curfew?

PM Edi Rama: The answer to the second question is no.

As far as the first question is concerned, we are waiting for a recommendation from the experts and we will then make an attempt to agree with other parties in order to set clear and equal game rules to protect health, as well as to agree on how the racing parties should not be limited to the point where they won’t be able to conduct normal electoral activities in the context of a new normality we are not used to.

– A little while ago you highlighted the case of England, which has made a lot of progress regarding the vaccination rollout, because the country has administered single vaccine doses to a wider body of people, rather than withholding additional doses. Is Albania mulling a similar plan to be implemented in Albania in a bid to increase the number of the vaccinated people? Taking notice of a recent surge in the number of fresh cases, are you as Prime Minister in favor of more restrictions or more relaxed measures?

PM Edi Rama: I didn’t comment on the single-dose approach, but I just commented on the immunisation process in England which obviously successful.

It is not me, but the Technical Committee of Experts do decide whether to stiffen or relax the restriction measures.

– Earlier today you took to Instagram to post some data on the public debt, which somehow challenges all the current data. You have stated that the public debt has been decreased by 14 billion lek since 2013, while the data show that the country’s debt in September 2013 was 63% of the GDP, whereas the official data from the Ministry of Finance show that the public debt is now estimated at 77.8%. How do you justify the public debt decrease you suggest via your Instagram post?

PM Edi Rama: You are referring to an incorrect data on the public debt in 2013, because if we are to go back and see what we did with the International Monetary Fund when we shed light into the hidden debts, the debt figure actually changed. It is as simple as that.

–In 2018, the member of the Parliamentary Committee on Economy, lawmaker Erion Braçe proposed an amendment to extend the zero personal income tax to salaries up to 40.000 lek, which is exactly what you are now proposing as part of your next term in office. What made you change your mind, as back then you clearly stated such a change won’t take place?

PM Edi Rama: It is very simple, since such statement was made in 2018. It is not a wrong ambition or a wrong idea, but for an idea to work, the right time and the right place are required. Back in 2018 we couldn’t afford the opportunities we have created now.

–Do you think tourism industry will resume this year and do you expect the state budget revenue from tourism to grow this year?

PM Edi Rama: I expect the vaccination drive yields its very positive results by the peak of the summer tourist season. This would certainly help tourism a lot.

– You said that vaccination of the medical personnel will complete by second week of March and the mass immunisation of the population will begin afterwards. Does your vaccination strategy projects a certain number or a percentage of the population that would have received the population until early summer season at least, providing more guarantees to the economy and a breath to the tourism sector. –The second question is about the reconstruction programme. Many families have yet to move into their new homes, and many others have been told that their houses cannot be rebuilt because of their remote location or unstable terrain. However, the government has decided to provide these families cash compensation so that they can build their homes themselves. Is there a figure on the number of these families? Has the government allocated a fund for these families and when the compensation grants will be distributed to them?

PM Edi Rama: The distribution of compensation grants is already underway and their number varies for each quake-affected municipality. All the families whose old houses were situated in a terrain with unfavourable geographic and geological locations, which make construction of their homes impossible because of the extremely high costs for companies and therefore they can build their homes themselves on the site of the old houses or elsewhere, and they are entitled to benefiting payment that will cover the construction costs. The impact of this measure turns out to be very positive, because families have generally welcomed it.

As far as the second question is concerned, I would answer this question only if you would be able to tell me how could I possibly comment on number of the vaccinated people, while we lack the required vaccine ne doses to launch the population’s mass immunisation.

– Once you will send your team to enter the field and unveil your program or your vision for Albania in 2030, will former cabinet members like Fatmir Xhafaj, Ditmir Bushati or Sander Lleshaj be members of this team?

PM Edi Rama: I am not here to issue comments so that you can write news stories. Nobody is different from the others. They are all part of the large group, where the selection process will take place. The political heads in the country’s districts are tasked with preparing the drafts and tabling the proposals for the team in every district. The final team will certainly be approved by the Socialist Party’s chairmanship. I will receive the proposals from the heads of the party in the country’s districts, who should certainly make their proposals responsibly in view of the election’s result and the party’s chairmanship will have its final say.

– Mr Prime Minister, you mentioned Israel and the vaccination process underway there and of course we can state that it is a success story. The vaccination data in Israel speak for themselves, indicating a positive response of the society regarding the vaccination. As far as I know, two professors have visited Tirana last week. One of them, if I’m not mistaken, has discovered one of the vaccine ingredients. Have you met these two professors or scientists and, second, given that this vaccine is showing very positive results in Israel, do you think you would be able to establish contacts with the government of Israel to secure this vaccine?

PM Rama: You would be astonished if you would know the number of contacts I have established with the governments inside and outside Europe and how far this effort has gone in terms of the geography. However, I don’t want to make any comment, as I have repeatedly stated, this is a kind of a war taking place behind the scene and it is now wise to name their names as we could hurt our own self.

– I have two questions about what you presented today. It was said that small businesses will benefit 5 billion lek from the abolition of tax and VAT to promote consumption. Do you think that 40.5 million euros will be re enough to overcome this strong consumption crisis we are going through?

Second, you mentioned the minimum wage and of course it helps a large number of the low-income workers, but a part of the businesses, especially the businesses hiring a high number of people see it as an additional burden. Do you think that this 36.6% increase over all these years – given that the minimum wage was increased by 15.5% previously – is a non-organic and forced increase?

PM Edi Rama: No, this is absolutely not a non-organic increase. It is a right growth and if you are to take a look at the European Social Card you will find out that ratio between the minimum and average salary is the right one.

Meanwhile, regarding the business’ concern, I am sorry, but it is unimaginable to provide a 220.000 lek salary to people, including the social and health contributions. So 300.000 lek salary is the minimum for those workers who give back to businesses all those profits. Businesses need to be aware that this minimum wage will continue to rise. Of course, by increasing the minimum wage, businesses will definitely benefit more motivated workers, skilled workers, more willing workers to face other business development challenges.

As for the calculations you make, I can say it is not correct, because of the fact that this is not a temporary measure.  This is a permanent measure and if you are to calculate that the effect of the profit tax removal on the small business is just 40 million euros then you should multiply it with four years and the result would be quite different, a figure that is no longer collected in the state budget, but it ends in the pocked of the individuals and the households of those who own or work in small businesses. The decision will help businesses to increase wages for their employees, enhance their ambitions and, of course, will increase their income, and no matter how much they increase their income, as long as they remain a small business, they will pay zero taxes. This was inconceivable just 7 short years ago. Imagine that the ceiling for the annual turnover of the small business was up to 8 million,  ie, up to $80.000. Today, the annual turnover was up to 114.000 euros. Imagine that the small businesses with an annual turnover of over 2 million or over $20.000 and paid VAT.

The change is epochal and its effects will be seen year after year. So, undoubtedly small business has found in this government the biggest, safest and most determined supporter.

– The first question is about the data published by the Ministry of Finance today, showing that the public debt during 2020 has risen to 77.8%, while the economic decline was 6.6%. What measures do you envisage to improve economic growth and reduce public debt?

– Given that every country, not only Albania, are obviously finding it really hard to secure COVID-19 vaccine deliveries from the Western countries, and given that you acknowledged that you are communicating with many governments of the non-EU states, are you considering attempts to secure Chinese or Russian vaccines?

PM Edi Rama: I am sorry, but I have no comments about this.

Me poshte vijon pjesa e dyte nga konferenca e perjavshme e KM Rama lidhur me ekonomine:

As for the first question, you should bear in mind something. Debt is not the problem, but the debt financing capacity and our debt financing capacities are higher than ever before. This is a very important data. The national debt could have been lower in the past, yet the country lacked the debt financing capacities and it threatened the state’s collapse. Don’t forget that when we took office in 2013, the first meeting with the International Monitory Mission concluded that Albania was on the verge of collapse due to the hidden debts and it was most likely that the country was unable to pay wages and pensions. At the same time, you shouldn’t forget that IMF asked us to cut salaries and the state pensions.

Do you imagine the situation we were in back then?

This was because it was a bad debt and an un-financeable debt.

Our debt financing capacities today are higher than ever before. Our performance in the international capital markets was significant in this aspect and what happened with the International Donors’ Conference was really fantastic, precisely because it provided us the capacities to finance the debt. As of today, we have yet to spend a single penny from the loans and pledges we secured from the Donors’ Conference. Not a single penny. All the new homes already under construction, all the school buildings you have all seen for yourselves – in the meantime construction of the EU-funded educational facilities is also underway – but the schools that have been built or are being built to date are all funded by the Albanian government only. This is because our financing capacity is now much higher compared to what it was previously and this is the most significant data for everyone who is forced, due to his job or because he is curious to learn about the most basic elements of this process.

–My question is about the vaccination rollout, given that the government’s vaccination strategy included health professionals first and then the personalities…

PM Edi Rama: No personalities. This is a speculation. The vaccination process has now begun with the seniors over 80 years old.

– To conclude, which group is going to be given priority next? Will individuals with underlying health conditions be given priority? This is because it is worth noting that young people are also at risk of severe Covid-19 illness.

PM Edi Rama: The young people who are at risk should protect themselves. They should really protect themselves and make whatever it takes not to break the safety guidelines and rules as the virus is becoming a threat to everyone now. In the meantime, we won’t reinvent the wheel and we won’t improvise a process of our own. We have come across and looked at all vaccination strategies and they all have a common denominator; the vaccination begins with administering the doses to the older adults and gradually to younger people. The process begins with the vaccination of doctors and nurses, the policemen and it should go on further horizontally. What really matters most is the quantity of the vaccine doses, because a lot was speculated over a total of 20 plus older people everybody knows who they are as part of the vaccination process for hundreds of elderly and this is of course a result of the vaccine quantity stress. What I can state is that we are really fighting to secure more vaccine doses. We are fighting for this. We have received confirmation for a total of 360.000 Astra Zeneca vaccine doses, which is a considerable quantity, which will be included in the process instantly and once these 360.000 doses of the Astra Zeneca vaccine are delivered we will certainly start to administer the vaccine to people at 65 and younger. In the meantime, we are also discussing about another considerable vaccine shipment, but please understand the position I find myself as I can’t provide more details, since these have yet to be finalized and I don’t want people say he pledged, but failed to deliver on his pledge. This is all. The thing is that we will receive the 41.000 doses of the Pfizer vaccine within March and we expect to receive more doses of both Pfizer and Astra Zeneca vaccines in April. What we need now is finalization of the agreement with another friendly nation, which has set the process in motion for the 360.000 Astra Zeneca vaccine doses and I am waiting every hour, every day for a confirmation from my counterpart in that country and conclude whole this story that has been already finalized at the level of health authorities, yet the seal on it is still needed. What do you want me to say more than that? And I am telling this only, so if we fail I can show you the documents. The process has taken place and it is not merely a matter of words. We are also very close to reaching an agreement with another friendly country on securing another large shipment, while earlier today we contacted a third country about this issue. Let’s see what will happen, since we have established 33 contacts, yet only three of them could be materialized with a concrete deal. I am the tallest beggar on the planet. This is for sure/

–Greetings! Given that EU and the EU funds were mentioned, the Minister announced a day ago that Albania has received a fund of 10 million euros to finance innovative businesses, while the Head of the Delegation, Luigi Soreca said a week ago that EU is the biggest partner of Albania. The European Commission has adopted a substantial economic and investment package mobilising up to 9 billion euros, yet in order to gain access to this funding the country should apply through certain projects. My first question, which are the projects Albania plans to submit and will these projects largely focus on the reconstruction programme, the ways to cope with the pandemic effects or other major development projects? Meanwhile, I have a question for Finance Minister Mrs. Denaj, who on November 2020 stated that the public debt is expected to take a downward trend in 2021. Do you stick to this statement, despite and the pandemic and the earthquake consequences?

Minister of Economy and Finance Anila Denaj: Yes, I stick to that statement and I would like to remind everyone of the amendments we have approved to the organic budget law in July last year to include a specific article for 2023, with a positive primary balance, which is a fiscal term and which is translated into more fiscal consolidation and reduction of the public debt. If I may I would like to underline that the national debt was 66.3% in 2019, but everyone seems to forget this. However, it was an obvious consolidation from 70% in 2013, even 72% after including all government arrears, and the debt fell to 66.3% in 2019. We have reduced the debt and we will do so in the future. Of course, the economic growth, the revenue growth will contribute to this.

PM Edi Rama: The EU investment plan, more precisely, is estimated at 29 billion euros. The eight billion euros plan is correct, but it includes the grants only. An extra one billion euros is the fund to guarantee the loans worth 20 billion euros for the Western Balkans. The plan identified three main areas; the infrastructure as part of the connectivity, which includes highways, railways and seaports; energy and the digitalization and we are largely focused on this plan, which will be one of our main instruments during our third term in office and for our vision for Albania 2030. We have set up a special team, while we are building a network of international consultants so that we can press ahead with projects. In the meantime, please bear in mind the fact that we have receive pretty much positive reactions regarding the projects we have advanced with the Western Balkans Fund and I believe I will be visiting Brussels on March 1 to discuss precisely this investment package with the Commissioner who has launched this plan, which is definitely very challenging as it requires huge designing capacities and it also requires interaction with other countries, as the investment plan aims at strengthening the infrastructure connectivity, energy and digitalization in the region. However I remain very optimistic.

–First of all, I would like to say that you Mr. Rama seem not to keep promises, as last week you promised I would be given the floor first.

PM Edi Rama: Sorry, but I didn’t see you. I just saw you. I apologize, as I would have given the floor you first, but I didn’t see you. I wouldn’t have made such a mistake otherwise.

– The question I would like to make is: You talked about plans to double the social welfare benefit. Why such a decision is announced just two months ahead of the parliamentary elections, given that pandemic started a year ago? It has been a year now since the pandemic outbreak but why the social welfare benefit was increased twice as much just two months ahead of the elections and the second question is about the wiretaps of the Mafia-type organized crime syndicate Ndragehta. As we know, the Special Prosecution Office, SPAK, has launched an investigation into this group. The famous “friend” mentioned in the wiretaps and revealed by the media is Besnik Halili, administrator of the company GTS, who has been most recently granted three more tenders, although under investigation by SPAK. Shouldn’t the investigation conclude first for the tenders to be awarded later, given that his company has been favoured previously?

PM Edi Rama: Thank you very much! First of all, Shijak TV has changed its look, yet it hasn’t changed its content at all, as you keep playing the prosecution office’s role, as well as the role of the courts and the state, forgetting that there are rules and work ethic. You are naming individuals who are under investigation, who is most favoured, who is detained, who is going to be detained, but all these are incompatible with the reality and I never comment on names of companies, businesses, because it is neither the Prime Minister’s duty, nor his ethic to revile and vilify people whenever speaking, like my predecessors have done, or more precisely my predecessor has done. However, it is a good thing that SPAK has been involved in this issue to provide an answer to all of those who, according to me, have been talking nonsense to date. If there are things that haven’t been said or there are unknown things, SPAK will surely discover them. But everything has been nonsense to date.

As for the other question, you should go back to 2020 to see that the social welfare benefit granted by the government to the needy families has been increased twice as part of the relief package amid the pandemic, when these social categories and families were forced to stay at home and found themselves in a very tough situation. In other words, the decision has not been made two months ahead of the elections. This decision was made last year and was made part of the state budget and distribution of half of it has been delayed for technical reasons. Now this technical issue has been solved and these families are now receiving the doubled social welfare payment. The decision has been made last year. I think this is clear. Thank you very much and take care of your health, because it is really necessary for everyone to do their duty to themselves and to others.