Tax Burden in Albania and the Western Balkans 2024

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Introduction

Context and relevance of tax burden analysis

Objectives and research questions

Methodology and data sources

Structure of the document

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Executive Summary

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  1. Theoretical and conceptual framework of tax burden

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  1. Economic and fiscal performance (2021–2024)

2.1. Economic and fiscal performance in Western Balkans (WB6)

2.2. Albania

2.3. Bosnia and Herzegovina

2.4. Kosovo

2.5. Montenegro

2.6. North Macedonia

2.7. Serbia

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  1. Tax Burden in the Western Balkans

3.1. Structural analysis of budget revenues in WB6

3.2. Analysis of tax burden by structure and its effectiveness in WB6

3.3. Dominance of VAT in the regional fiscal system

3.4. Analysis of the burden of direct taxes and their effectiveness

3.5. Progressive vs. flat tax: beneficiaries and effects

3.6. Effectiveness of VAT and social contributions rates in WB6

3.7. Tax on labor and the impact on employment and formalization

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  1. Distribution of the tax burden by budget destination

4.1. Regional comparison of the way of spending revenues

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  1. Agreements for the elimination of double taxation and the impact on WB6

5.1. Countries with the most active DTTs

5.2. The role of foreign investors and fiscal treatment

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  1. Fiscal freedom in the region and the perception of the tax burden

6.1. Fiscal freedom in WB6 and the perception of the Tax Burden

6.2. The impact of perceptions on the level of compliance

6.3. Fiscal freedom and the perception of the burden

6.4. Fiscal Freedom Day 2025 in every country

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  1. Analysis of the tax burden in Albania (2021–2024)

7.1. Structure of tax revenues

7.2. Impact of recent fiscal policies

7.3. The role of large taxpayers and the Tirana region

7.4. Tax burden for the regions of the country through budget expenditures

7.5. Tax burden by regions of Albania

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  1. Analysis of the tax burden in Kosovo (2021–2024)

8.1. Budget performance

8.2. Structuring of own-source revenues

8.3. Tax burden between regions

8.4. Budget performance in Kosovo 2024

8.5. Impact of taxes on income distribution

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  1. Inequality and progressivity in the tax system in Albania and Kosovo

9.1. Tax evasion and exclusions as factors of inequality

9.2. Comparisons with EU standards and Gini index before/after transfers

9.3. Cash and the impact on informality and tax administration

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  1. Possible tax reforms in Albania and the region

10.1. Simulation of alternative tax burden scenarios

10.2. Broadening the tax base without increasing rates

10.3. Reducing the burden on labor and shifting towards taxes on capital and wealth

10.4. Development of the local fiscal assessment system and the link to performance

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  1. Conclusions and thoughts

11.1. Conclusions for Albania

11.2. Conclusions for Kosovo

11.3. Conclusions on WB6 and regional trends

11.4. Thoughts on progressive and fair fiscal policymaking

11.5. Next steps for fiscal monitoring and transparency

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Appendix

A. Comparative table of tax rates in WB6 (2022–2024)

B. Summary of tax legal changes in the region

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Description

The aim of this study is to provide an in-depth and comparable understanding of how the tax burden is distributed in the economy, over time and across the Western Balkan countries. The specific objectives are divided into five main axes:

  1. Assessment of the level and structure of the tax burden in the WB6
  • Measurement of the overall level of tax revenues as a percentage of Gross Domestic Product (GDP) in each country.
  • Analysis of the relative contribution of taxes on consumption, income, profit and wealth.
  • Comparison between tax structures to identify the reliance on different categories of tax resources.
  1. Analysis of the distribution of the tax burden by destination
  • Identification of how tax revenues are distributed between the central budget and local budgets.
  • Assessment of the tax burden per capita at different territorial levels (national, municipal, regional).
  • Study of specific cases of large taxpayers and their weight in public finances.
  1. Assessing the fairness and progressivity of the tax system
  • Analysis of the impact of taxes on different social strata and on the distribution of income.
  • Assessment of horizontal and vertical equity in the design of the tax system.
  • Identification of aspects that may produce tax regressivity, especially through consumption taxes.
  1. Monitoring reforms and legislative changes
  • Documentation of recent changes in tax policies (rates, exemptions, tax bases).
  • Assessment of the fiscal impact of reforms in Albania and other WB6 countries.
  • Analysis of harmonization with EU standards and commitments to reforms in the context of integration.
  1. Construction of comparable indicators for transparency and decision-making
  • Creation of a sustainable set of indicators for cross-country and inter-annual analysis.
  • Provision of a database for policymakers, the academic community and civil society.
  • Preparing tax policy suggestions for a fairer and more efficient system

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