Value Added Tax (VAT) - implementation issues in Albania

Abstract

Abstract Value Added Tax (VAT) today is the main tax in most countries, including Albania, as it represents the largest share in budget revenues. The tax system applied to VAT is similar to the regressive system, where with increasing income the tax burden decreases. So being a consumption tax low-income households spend a large portion of their income on consumption as opposed to high-income households, so they bear a greater burden compared to the income they benefit. An increase of the VAT rate inevitably affects the increase in: inflation, unemployment, interest rate, so people in general will become poorer. The government should be careful in the fiscal policy that it implements so that the increase of budget revenues to can be achieved not through the increase of the tax burden, but through the expansion of the tax base and the implementation of VAT rates in an escalated manner, in order to facilitate tax burden for lower income families. This study focuses on the problems encountered in the implementation of VAT in Albania and its impact on the economy. For the purposes of the study, the methodology used consists of the use of quantitative and qualitative methods, quantitative methods were used by analyzing primary data collected by the author, as well as qualitative methods by analyzing secondary data, collected from publications of well-known authors in this field and official institutions.