We have a tax on wages and not on income, as there is a lack of inclusiveness

Taxpayers are more willing to pay taxes if they believe that governments spend tax revenue on programs that benefit people like them, or programs that they value that others are paying their fair share of taxes and that they have a role in getting. of tax decisions and spending (Brautigam, Fjeldstad and Moore, 2008).

Meanwhile, it is easier, both politically and administratively, to collect the necessary revenues through indirect taxes, such as VAT and excise taxes, and national taxes. This is an indicator that tells us that there is a high level of wealth inequality.
A well-designed TAP can play an important role in raising incomes, reducing inequality and directly influencing the development of a more inclusive society.

The main focus of the fundamental tax changes in Albania has been the introduction of VAT and excise duty, not TAP.

Albania, like the countries in the region, faces pressure to maintain or increase spending on social programs.
The economic and social impact of the pandemic is forcing the government to increase both the level of spending on itself, but also pushing it to face challenges in increasing tax revenues.
In this current reality, the voice of everyone who had the courage and the exhaustive argument to ask the government today and yesterday should have been heard to diversify the income base to replace the declining income of natural resources, to manage the difficulties fiscal of oil price volatility and to introduce climate mitigation policies to increase business dynamism and competitiveness.

Many of the natural resource countries (Middle Eastern, African, Latin American) have grasped higher living standards, more generous food and fuel subsidies, and other social spending programs—all of which have consumed additional income without resources to support them.

In many of the last years, it has been declared and programmed to fight inequality. Although in the middle of the last decade it was possible to reduce inequality by 2 percentage points (the GINI coefficient), the role of taxation could not be fulfilled in reducing inequality, even though there was an attempt to build a fair taxation system, which remained just a political slogan seriously compromised in the will to do taxes.
TAP is known to be the tax instrument that has the greatest potential for reducing income inequality, but has limited impact on reducing wealth inequality.

The unfulfilled TAP reform in the last decade took the form of reductions in the flat rate (flat tax) without any meaning and change in the improvement of capital income taxation.
This has influenced the decline of progressiveness in TAP, at a time when issues related to equality and inclusiveness play a more prominent role in policy orientations towards taxpayers.

Changes in technology and digitization, business practices and payment methods have the potential to improve the information available to tax authorities, a key element for the successful implementation of the TAP regime.

But technology alone is not enough, as all approaches to successful fiscal policies teach greater cooperation between tax authorities and interest groups and the main actors that influence the behavior of taxpayers. This way of acting, which requires clear vision without political patronage, has been proven to increase transparency and the trust of taxpayers.
If we had a leadership based on professionalism and not political partisanship, all the huge investments invested with poor transparency would ensure access to information and treat taxpayers based on risk, which means that all of us would they had made the system and fiscal burden easier for us, including the distribution of the burden in taxpayers’ activities and financial holdings abroad.

The potential for the TAP regime to contribute to “state building” depends on some kind of fiscal contract between taxpayers and the government, as well as a political environment that allows for such a relationship. These developments can influence both the decision whether there will be a TAP that is right for everyone, as well as the design considerations for what are new and reform initiatives.
The low diversity of sources from which taxes for the budget are obtained, in terms of weak capacities, the fragility of the integrity of the administration and the direct intervention of political governments, should provide lessons that can be useful for taxpayers who put the economy before politics. and they have decided to give more than they receive from the country’s resources.

According to an IMF study [1], in an analysis of the factors that affect the capacity of taxes to achieve a fulfillment of the mission of TAP, that of taxing income according to the amount that is created, it seems that:

Economic factors [2] do not affect an increase in the capacity of TAP, since the large weight of the agricultural sector together with the informal economy have a negative impact on the tax base and are a burden on the tax system. But, in the meantime, if we had a high level of economic development and a higher level of exports in relation to imports, it would be a positive impact. In reality, for Albania, these factors also have a negative impact on the tax capacity.

Demographic factors [3] with the level presented by each of them have a different negative impact on the tax capacity of the Albanian fiscal system.

Political factors [4] have a negative impact on the tax capacity in the main since none of the factors included in this group are considered to have a positive trend over the years, based on the indices of the reports for each of them, but also the reports from the analyzes themselves of Albanian experts.

Non-tax revenues (revenues from the use of natural resources and institutional fees, grants, loans) have a negative impact and weaken the tax capacity, as they directly affect laziness, atrophy and corruption of the honest model.

Likewise, investments in technology for administration (fiscalization) together with e-albania are considered to have a positive impact on strengthening tax capacities. But starting from the big problems of loss of credibility due to hacking, but also the non-effective use of technology (it is not seen that risk management based on technology works), it does not give the full impact that they could give in conditions and environment unaffected by the other factors above.

The constraints on tax reform that have been going on for several years are likely political rather than administrative and are inevitably tied to decisions to maintain or increase funding for government spending programs.

Political challenges vary.

But essential is the change of the social contract (including the fiscal component), as a challenging revolution to reverse the poor results.

This is not easy, and may even be very difficult if we maintain the provision of government services and subsidies at no cost or at low cost based on the principle of low taxes.

This policy, which still continues in some cases, has transformed the institutional environment to not have the necessary institutions to promote tax negotiations between taxpayers and the government.

[1] https://www.imf.org/-/media/Files/Publications/WP/2023/English/wpiea2023034-print-pdf.ashx
[2] Level of development, share of exports and imports, share of agriculture, informal economy
[3] Population growth, Age distribution, Level of inequality (of income or wealth).
[4] Index of democracy, Participation in voting, Trust in government, Corruption