VAT gap in Albania and Kosovo, 2021

In this study, the ALTAX Centre presents the third-time effort to assess the level of the tax gap. In the third edition, as well as in the previous publication a particular part of study received appreciation for the tax gap in Kosovo. The gap estimate in this publication is presented, only for VAT including the two tax administration agencies in both neighboring countries in WB6: customs and taxes.

Based on macroeconomic and fiscal indicators, the study presents some findings that are worth discussing.

• Most budget revenues in Kosovo consist of a tax burden that bears a share of 88.7% of total budget revenues, and in Albania the tax burden is 92.8% of total budget revenues. The state budget of Kosovo has collected for 2019 the amount of 1.95 billion Euros tax revenues, where tax revenues are 1.73 billion Euros.
• The state budget of Albania has collected in the budget 3.76 billion Euros, where tax revenues are 3.49 billion Euros.

The analysis of the legislation on tax exemptions and facilities shows that in Albania 47.7% of GDP is exempted from VAT, while in Kosovo 23.8% of GDP is exempted from VAT.

Total VAT theorically without VAT exceptions and VAT evasion:

• in Albania it is 255.4 billion ALL (2.1 billion Euros) from 155.9 billion ALL (1.3 billion Euros) per year, which is currently collected, i.e., a difference of 99.5 billion ALL (814.4 million Euros);
• in Kosovo it is 1.2 billion Euros from 848.1 million Euros per year, which is currently collected, i.e., a difference of 372.7 million Euros;

The VAT gap from the exemption and relief policies together with the reduced VAT rates:

• in Albania it is 5.4% of GDP
• in Kosovo it is 3.6% of GDP;

VAT Gap from administration performance:

• in Albania it is 0.5% of GDP
• in Kosovo it is as much as 1.7% of GDP;

The efficiency of VAT according to the respective ratio (C-Efficency Ratio) considering the fact that the closer to the 1 level is a better indicator:

• in Albania it is 0.66;
• in Kosovo it is 0.93.

Inside the study, you can get acquainted with the topics covered based on the data and calculations aiming to be as accurate as possible in the definitions and comments on the findings.