Tax evasion costs the budget more than 700m euros

 

Tax evasion costs Kosovo's budget hundreds of millions of euros a year.

More than 30 percent gross domestic production is informal economy, according to some data that has compiled officials The European Union.

They have also been published in the progress report on Kosovo late last year.

Translated into figures by former Kosovo Economy Minister Haki Shatri, it means over three billion euros.

With the Law on Budget Breaks this year, gross domestic production is envisioned to be around 10.6 billion euros.

Problem size

Noting the seriousness of the problem, Shatri says that tax evasion is seen everywhere from underpaid tax on added value, pay tax to sale of taxable products.

If the state could gather all those who exceed 25% Chvar says this year's budget of 3.3 billion euros would be added to over 700 million.

Additional revenues, according to him, “would provide higher salaries, investments in capital projects, in the energy sector, but also in social transfer”.

“could be built or digitized schools, invested in hospitals... So, the well-being of Kosovo citizens would improve”, he adds to Radio Free Europe.

Besides the impact on budget revenues, tax evasion creates unfair competition in the market, says former Kosovo Central Bank Governor Fehmi Mehmeti, now leader of the Economics and Finance Research Institute.

According to him, businesses that avoid taxes take unfair advantage of law - abiding people.

Many businesses continue to flee tax duties they have towards the state”, he says.

With the law in Kosovo, all businesses are obliged to be equipped with fiscal crates and, therefore, to issue fiscal vouchers for any real acquisitions.

According to the Agency for Registering Business, which functions under the Ministry of Industry, Intervention and Trade, more than 236 thousand businesses are registered in Kosovo, but it is not clear how many of them are active.

Kosovo Tax Administration data shows that the number of taxed businesses is over 44,000.

And according to Riinvest Institute data, promoting modern economic development in Kosovo, there are 23 per cent to 25 per cent of businesses that avoid tax obligations by subreporting sales.

The institute's executive director, Alban Hashan, tells Free Europe Radio that the tax evasion rate is higher in small companies because even controls in them are, according to him, less rare.

This is how we identify during surveys conducted with businesses, but also during discussions with commercial banks in Kosovo. Most banks, when doing credit tests, take into account the circulation declaration at ATK but also ask those called double books that hold companies for domestic interests”, Hashan says.

The books in question often show that private businesses record the entrances to the exit for their own interests.

Free Radio Europe asked the Central Bank and the Association of Banks of Kosovo if the bank's requests for such evidence have any legal basis, but received no answers.

What is being done to fight tax evasion?

In a written reply to ATK, the Free Europe Radio reportedly said that this institution, during activities to prevent and combat this phenomenon last year, has conducted 212 inspections, while 47 people suspected of tax evasion in the economy have submitted criminal charges.

Of these activities, according to ATK, it has proved that the value of tax evasion has been above 9.3m euros. In 2022, the value was 3.5m euros.

For tax evasion, the law in Kosovo envisions fine sentences and imprisonment of up to four years, depending on the amount used.

On January 9th, twelve Kosovo Tax Administration officials and a business owner were arrested under suspicion of tax evasion and duty fraud, but they were released after 48 hours in maintenance.

The Kosovo Prosecutorial Council did not respond to Radio Free Europe's request for comments on the subject.

The Kosovo Institute for Justice (IKD), which monitors the work of courts, says that during the session monitoring process, large numbers of cases of tax evasion have been recorded.

In a Written Answer REL is said to have “in a much smaller number, prosecutors also file the indictment”.

“From monitoring IKD court hearings, most of the time ends with a free trial... In cases where the court finds guilt, the sentences pronounced are mainly fine and conditional on”, the IKD says.

According to Schitr, Kosovo authorities must make inspections “even more rigorous”.

In order to prevent and combat tax evasion, ATK has published on its official website an app for punctuation or reporting tax evasion.

Evidence of unfair bills, unregistered goods, extinguishing bills, failure or manipulation with fiscal crates, workers without labour contracts and others should be charged for reporting.

The European Union, where Kosovo learns to membership, considers tax evasion as a “complex issues that present global challenges”.

Until national measures are important, they can never succeed alone. That is why the EU and its member states must work together, using common tools and systems and exchanging the best practices. Cross-border co-operation remains crucial to achieving results”, EU Value.