Summary analysis of Government Tax Operations in Albania (2020–2025)

During the period 2020–2025, the operations of the Albanian government present a detailed snapshot of the fiscal situation and revenue structure. Below is an in-depth analysis of the key indicators (as % of GDP), with a focus on tax revenues, their components, and fiscal trends.

Key Items	2020	2021	2022	2023	2024	2025
Total revenues and grants	25.7%	27.4%	26.6%	27.2%	28.1%	28.8%
1. Tax revenues	18.2%	19.5%	19.5%	19.2%	19.5%	20.6%
– VAT revenues	7.9%	8.7%	8.9%	8.1%	8.4%	9.0%
– Corporate income tax revenues	1.7%	1.9%	2.2%	2.7%	2.4%	2.5%
– Excise tax revenues	2.7%	2.8%	2.5%	2.5%	2.5%	2.6%
– Customs duties	0.4%	0.4%	0.4%	0.4%	0.4%	0.4%
– Personal income tax revenues	2.0%	2.1%	2.1%	2.4%	2.5%	2.7%
– National taxes	2.2%	2.3%	2.1%	1.7%	1.9%	1.9%
– Local government revenues	1.3%	1.4%	1.3%	1.3%	1.5%	1.6%
2. Social security contributions	5.9%	5.9%	5.7%	6.1%	6.3%	6.5%
3. Non-tax revenues	1.1%	1.2%	1.0%	1.0%	1.6%	1.0%
4. Grants	0.5%	0.7%	0.4%	0.9%	0.7%	0.7%

1. Total Revenues and Grants

Total revenues and grants have gradually increased from 25.7% of GDP in 2020 to 27.4% in 2023, and are projected to stabilize at 28.8% in 2025.

This stable increase, especially from 2023 to 2025, reflects efforts to enhance revenue generation. However, the growth remains modest compared to Albania’s long-term fiscal pressures (as noted in earlier analyses). A more aggressive approach is required to reach Albania’s full revenue potential, particularly given underperformance compared to peer countries.

2. Tax Revenues

Tax revenues have grown steadily from 18.2% of GDP in 2020 to 19.5% in 2023, and are expected to reach 20.6% by 2025.

Despite the growth, Albania still lags behind regional counterparts in tax-to-GDP ratio. Achieving approximately 23% of GDP will require improved compliance, stronger administration, and reforms in tax policy.

3. Breakdown of Tax Revenues

Value Added Tax (VAT)
VAT revenues rose from 7.9% of GDP in 2020 to 8.4% in 2024, with a projected increase to 9% in 2025.

VAT remains the largest source of tax revenue, reflecting its central role in Albania’s tax system. However, the temporary decline in 2023 and 2024 relative to 2021 and 2022 raises concerns about consumption trends or administrative and enforcement challenges.

Corporate Income Tax
Corporate income tax revenues increased from 1.7% of GDP in 2020 to 2.7% in 2023, before declining slightly to 2.4% in 2024 and projected to reach 2.5% in 2025.

This gradual growth indicates a stable corporate sector. However, the slow pace suggests room for improvement in compliance and tax base expansion, especially if reforms in policy and administration are realized.

Excise Taxes
Excise tax revenues have remained relatively stable, declining slightly from 2.7% of GDP in 2020 to 2.5% in 2024, with a slight increase expected in 2025.

Excises continue to be a reliable revenue source, but returns may be limited unless new categories are introduced or rates are adjusted.

Customs Duties
Customs revenues remained steady at 0.4% of GDP throughout 2020–2025.

This consistency suggests stable levels of trade, though there may be opportunities for revenue growth through trade policy reforms or regional trade agreements.

Personal Income Tax (PIT)
PIT revenues grew from 2.0% of GDP in 2020 to 2.5% in 2024, with a further increase to 2.7% projected for 2025.

While PIT shows a slight upward trend, compliance issues remain a challenge. Expanding the tax base, revising exemptions, and improving administration would support increased PIT revenue.

National Taxes
National taxes remained relatively stable, with a slight decrease from 2.2% of GDP in 2020 to 1.9% in 2024, expected to remain unchanged in 2025.

The limited growth may indicate stagnant reforms or implementation issues in certain sectors. Enhancing tax administration could help increase collections.

Local Government Revenues
Local revenues remain small, fluctuating between 1.3% and 1.5% of GDP through 2024, with 1.6% projected for 2025.

Local governments contribute little to overall revenue. The expected increase reflects some efforts to enhance local taxation, but they still depend heavily on central transfers. Greater autonomy and improved collection mechanisms could boost local revenues.

4. Social Security Contributions

Social security contributions held steady at 5.9% of GDP in 2020, rising to 6.3% in 2024 and projected to reach 6.5% in 2025.

This stability suggests a relatively solid system. However, pension reforms and broader coverage—especially among informal workers—are key to increasing contributions. This is critical to addressing long-term fiscal pressures on the social security system.

5. Non-Tax Revenues

Non-tax revenues remained stable, fluctuating between 1.0% and 1.2% of GDP, peaking at 1.6% in 2024. They are projected to fall to 1.0% in 2025.

These revenues remain a minor component of total income, highlighting Albania’s dependence on tax sources. Increasing non-tax revenues via state-owned enterprises, privatization, or fees could diversify and stabilize government income.

6. Grants

Grants remained relatively stable, increasing from 0.5% of GDP in 2020 to 0.7% in 2024, with the same level expected in 2025.

While useful, grants account for a small share of total revenues and are unlikely to increase unless Albania secures further support from the EU or international donors. Grants should not be considered a sustainable long-term revenue source.

Final Assessment

Total revenues have shown steady growth, but remain below full potential. Projected increases in tax revenues—especially from VAT, corporate income tax, and PIT—indicate ongoing efforts to improve revenue generation. However, the pace is modest, and further reforms are needed to close the performance gap with peer countries.

Albania’s revenue structure is heavily reliant on VAT and social security contributions, with relatively low input from corporate taxes, customs duties, and local revenues. Tax reforms and administrative improvements are crucial for raising revenues and reducing the fiscal gap. Priority areas include expanding the tax base (especially PIT and corporate taxes), reducing informality, and strengthening tax administration. These reforms could help enhance revenues and reduce dependency on external sources (grants) and government spending.