Why do only a few Albanians declare their income, while spending like the rich?

In 2025, only 124 thousand individuals submitted the Individual Annual Income Declaration (DIVA) in Albania.

This figure represents no more than 25–30% of individuals who have obligation based on the current law and especially on estimates for the active population with more than one source of income or who earn in 2024 above the threshold of 2 million ALL per year, should be part of this declaration process. The phenomenon is not only a statistical or technical issue – it speaks to a deep gap between the formal system and the economic reality experienced and manifested by citizens in their daily lives.

This low level of participation in the declaration system clearly contrasts with individuals’ actual consumption behaviors. It seems as if there exists an Albania that is not reflected in data, but which is very visible on the streets, at the seaside, in shopping centers, through credit cards, and in daily life that does not match reported incomes.

The real cost of living for a typical family with two adults and two children in major cities such as Tirana, Durrës, or Vlorë is estimated to be between 120,000 and 170,000 ALL per month. This translates into over 1.4 to 2 million ALL per year per individual, if we consider their share in consumption.

However, thousands of individuals who live according to this standard – and even exceed it – do not appear in the income declaration system.

This is not just a fiscal anomaly but a direct challenge to the legitimacy and effectiveness of tax administration in the country.

Visible luxury consumption is another aspect that highlights this mismatch.

In 2025 alone, over 4,500 vehicles worth more than 30,000 euros have been imported, mostly under individual names, many of whom do not appear as income declarants or are recorded with minimal incomes.

Likewise, there has been a significant increase in the number of real estate purchases, especially in coastal areas such as Dhërmi, Lalëz, or Palasë, by individuals with no registered economic profile.

Overseas travel has increased by more than 40% compared to the 2022–2023 period, according to data from tourism operators. Meanwhile, banks report an increased use of credit cards for monthly expenses exceeding 5,000 euros by individuals who do not declare sufficient income to justify these expenditures.

Beneath this surface of a declared system with individuals reportedly earning less than 45 euros per day lies an informal economic reality, often financed by hidden income. The discrepancy between declared income and real spending power is not merely an occasional deviation, but a widespread phenomenon that deepens the gap between honest citizens and those who benefit from the system’s weaknesses.

At first glance, this mismatch highlights a problematic fiscal approach, where fictitious declarations and non-declarations remain the norm for a large portion of individuals.

Furthermore, the institutional approach suffers from a lack of interaction and integration of data sources. Currently, the Tax Administration does not yet effectively cross-reference information from banks, the cadastre, customs, local taxes, and other public institutions.

The lack of a unified register of wealth and income makes it impossible to create an accurate profile of individuals, thus hindering the automatic identification of unjustified assets.

There exists a socio-economic approach that normalizes non-declaration.

It is not perceived as a problem by the majority of society, especially when it comes to rent, remittances, or income from secondary activities.

This “tolerance norm towards informality” is accompanied by an administration that is often passive toward individuals with a high economic profile, either due to a lack of technical capacity or because of political influence.

The costs caused by this phenomenon are multidimensional and severe for the economy and society. Annual losses from non-declaration are estimated to exceed 8 to 10 billion ALL – an amount that, for illustration, could cover a significant salary increase in the health sector.

Moreover, compliant taxpayers feel penalized by the tax inequality resulting from this unpunished informality. Without accurate data on real income, the formulation of targeted policies becomes almost impossible, whether for social support, credit policies, subsidies, or budget planning. The failure to identify unjustified assets seriously undermines the administration’s capacity to combat corruption and money laundering.

The way out of this situation requires deep and coordinated interventions:

• Expanding the range of individuals obliged to declare, including not only those with income above the legal threshold but also those with more than one income source or significant assets.
• Applying lifestyle-based cross-checks against declarations, by linking data from taxes, banks, cadastre, insurance, and customs, through an integrated and automated risk system.
• Strengthening personal wealth transparency, especially for officials and free professions, to build a climate of accountability and trust.
• A public campaign to raise awareness and report unexplained expenditures, which would help with fiscal education and social pressure.
• Restructuring the system of incentives and penalties, encouraging voluntary declaration while systematically and fairly addressing violations.

In conclusion, annual individual income declarations are still far from reflecting the real financial power of individuals in Albania.

The confrontation between a limited number of declarants and a reality of rampant luxury consumption without fiscal coverage raises a serious alarm about the functionality of the tax system. If a comprehensive reform is not undertaken, informality will remain not only a shadow but a barricade hindering the country’s sustainable and fair development. It will continue to damage equality, trust in institutions, and the state’s capacity to provide quality public services.

P.S. The investigation announced by the Tax Administration for 400 individuals with luxury cars is a necessary step, but it comes too late and symbolically, compared to the scale of the informal reality. While the very existence of such a list proves that information about the mismatch between lifestyle and income has existed for a long time, the current action reflects more public or international pressure than a sustainable fiscal strategy. Moreover, the selection of only 400 cases in an economy where thousands of luxury vehicles and real estate circulate outside any fiscal declaration is not enough to restore trust and equity in the tax system.