The American Chamber of Commerce warns of risks to foreign investment as the government’s 2027 fiscal package faces growing opposition from businesses, lawmakers and economists.
by Sidonja Manushi
TIRANA, Albania – Albania’s government has unveiled a controversial 2027 fiscal package, proposing significant changes to value-added tax, dividend taxation, personal income taxes, and small-business obligations. Prime Minister Edi Rama has presented the measures on October 28 as an effort to redistribute the benefits of economic growth, but business organizations and opposition parties have strongly criticized the proposals, warning of higher prices, weaker competitiveness, and declining investment.
The package comes at a sensitive political moment. Albania is facing widespread student-led anti-government protests, growing public dissatisfaction over corruption and economic conditions, and increasingly confrontational relations between the government and opposition. Student-led demonstrations, fueled by anger over perceived government corruption, a lack of jobs, and poor education standards, have engulfed central Tirana since mid-October and spread to other cities.
What the package actually proposes
The proposed changes would reduce VAT on 54 basic food products from 20% to 6%, while increasing the standard VAT rate from 20% to 21%. VAT on hotel accommodation would rise from 6% to 10%, with an exception for agritourism businesses. The dividend tax would increase from 8% to 15%, while corporate income tax would remain unchanged at 15%.
In the initial draft of the package, which circulated before the formal Oct. 28 presentation, the government proposed raising the corporate income tax rate from 15% to 17%. That proposal was dropped. Several statements from business associations and opposition politicians made on Oct. 27 referenced the original draft and the 17% rate, a distinction worth noting when evaluating those reactions.
Another significant measure would lower the annual turnover threshold for mandatory VAT registration from 10 million lek to 5 million lek, bringing an estimated 17,500 additional businesses into the system. The measure is expected to affect small enterprises and independent professionals, including consultants, lawyers, engineers and other service providers.
The government also proposes changes to personal income taxation. The upper threshold for the 13% salary tax bracket would increase from 200,000 lek to 300,000 lek per month, benefiting approximately 32,000 taxpayers, according to Rama. A new 30% tax rate would apply to monthly salaries exceeding 700,000 lek. That rate was initially set at 32% in the preliminary draft but was revised downward during the Oct. 28 presentation.
Additionally, a new revenue control bureau at the Finance Ministry will also be established to check the income declarations of high earners and ensure that retailers are actually lowering the price for basic food products.
Other measures include restructuring the circulation tax on fuel and vehicles and introducing a separate circulation charge for foreign vehicles entering Albania.
The government’s argument
According to the government, reducing VAT on essential foods could leave approximately 150 million euros annually in the hands of Albanian households. Finance Minister Petrit Malaj described the package as broadly revenue-neutral, designed to promote tax fairness, protect vulnerable households and strengthen revenue collection. Presenting the package at the Conference of Chairpersons, Malaj said the plan rests on three principles: income redistribution, greater tax fairness and improved tax system efficiency.
On Oct. 27, ahead of the formal presentation, Rama responded on social media platform X to early criticism. “Keep talking, keep talking about the new fiscal measures. Keep tossing your salad of hatred and ignorance with half-baked working documents, because tomorrow it will be the government’s turn to have its say with the approval of the first budget in history to exceed the 10 billion euro threshold and the most ambitious package for redistributing the benefits of economic growth,” Rama wrote.
However, the government’s calculations have raised questions about the actual distribution of the proposed benefits and costs. Although lower VAT on basic foods could provide relief to lower-income households, the reduction would not necessarily translate into equivalent retail price decreases. Much would depend on whether retailers pass the tax savings on to consumers and whether authorities can effectively monitor prices. Higher VAT on other goods and services could meanwhile increase household expenditures, potentially offsetting part of the expected savings.
What the opposition says
Political opposition to the package has been strong, though some of the earliest statements were made in response to the initial draft that still included a 17% corporate tax.
Sali Berisha, leader of the Democratic Party and former prime minister, accused the government in an Oct. 27 video statement of preparing substantial tax increases without adequate consultation. He described the package as “an act of disloyalty” and warned that the measures would “lead to the bankruptcy of hundreds of thousands of businesses and the destruction of hundreds of thousands of jobs.” Berisha pledged that his party would reverse the changes if it returned to power, introduce a 10% flat tax, and raise the VAT registration threshold to 15 million lek.
Democratic Party Member of Parliament Ervin Salianji, a member of the party’s economic commission, was similarly direct. “Business is not the government’s ATM,” Salianji wrote in a public statement. “Entrepreneurs are not at fault for working and making a profit. Citizens should not have to pay for abuses of power.” He specifically objected to the VAT threshold reduction, warning that “the more corruption there is, the more taxes businesses, freelancers and the tourism sector face.”
Democratic Party lawmaker Jorida Tabaku described the proposed measures as harmful to businesses and consumption, arguing that increased taxation would place additional pressure on an economy already facing structural difficulties. Speaking on the television program “The Unexposed,” she called it “an anti-business budget” and said the lower VAT threshold could increase operating costs for smaller operators and put them at risk.
Other opposition lawmakers focused on the implications for independent professionals. Democratic Party lawmaker Eno Bozdo warned that the VAT threshold measure would directly affect consultants, pharmacists, engineers, lawyers and notaries, with some professionals likely to raise prices to absorb the additional administrative and fiscal costs.
The political confrontation extended beyond words on Oct. 29, when opposition lawmakers disrupted a parliamentary session by setting off flares that filled the chamber with colored smoke. Democratic Party members also blocked access to the podium during a vote on a central bank bill. Berisha’s microphone was cut after he declared ruling lawmakers “deserve tear gas.”
Business community reacts
The strongest and most detailed criticism of the package has come from organized business groups, which argue that the government is introducing substantial tax changes without adequate consultation or assessment of their consequences for investment, employment and competitiveness.
On Oct. 29, the American Chamber of Commerce in Albania (AmCham), whose membership includes more than 200 companies and is led by Executive Director Neritan Mullaj, published a comprehensive statement opposing the proposed changes. The chamber warned that the measures could undermine the business climate and discourage foreign investment.
AmCham argued that the proposed changes affect key elements of the tax system and alter the conditions on which enterprises have built their operating, financing and investment plans. It assessed that interventions of this magnitude, especially when expected to be implemented from January 1, 2027, create uncertainty for businesses and could negatively affect the decision-making of domestic and international investors.
On the question of foreign investment specifically, AmCham was direct. “Sudden changes in taxes could undermine the confidence of existing investors and discourage potential investors from considering Albania as a destination for developing new economic activities,” the chamber said, emphasizing that this issue is of particular importance for American companies and international investors, who build their projects based on long-term financial plans and a predictable fiscal framework.
AmCham also questioned whether the food VAT reduction would compensate consumers for increases elsewhere. The chamber warned that if businesses pass additional costs on to consumers, higher family expenses may diminish or partially offset the benefits from reducing VAT on basic food items. It called for a comprehensive assessment of the package’s impact on household expenditures, inflation and purchasing power, and urged that businesses be allowed more time to analyze their impact and adjust their financial plans.
The Tirana Chamber of Commerce and Industry, whose president, Nikolin Jaka, signed the chamber’s formal proposals to the government on Oct. 9, welcomed the proposed reduction in VAT on essential foods but opposed raising taxes on businesses and other products. The chamber confirmed it had received no response to its October submissions before the government unveiled its own package. “The Chamber of Commerce emphasizes that it is not against fiscal reform; however, it insists that the 2027 fiscal package be brought back into the dialogue with the business community before any final decisions are made,” it said in a statement.
The Union of Albanian Manufacturers called for the publication of the fiscal proposals and their impact assessments, structured consultations with the business community before the changes are approved, and sufficient time for businesses to adapt. “The voice of the business community must be heard before any economic decision is made,” the association said.
Manufacturers and exporters have warned that higher taxation could further weaken their competitiveness at a time when many enterprises are already facing pressure from production costs and exchange-rate developments. The proposed increase in VAT on tourist accommodation has also drawn criticism, particularly because many operators have already negotiated or signed contracts for 2027 at fixed prices and may be unable to transfer the additional tax burden to customers.
The Foreign Investors Association of Albania (FIAA) also called for a revision of the fiscal package, warning of a potential negative impact on foreign investment flows. “Every significant fiscal change must be supported by comprehensive economic assessments, transparent consultations with the business community, and appropriate transition periods,” FIAA said.
Economist Eduart Gjokutaj questioned whether the expected fiscal gains justify the potential costs to businesses. He warned that lowering the VAT registration threshold could increase administrative expenses and create unintended consequences for smaller enterprises, particularly where the costs of compliance exceed the expected benefits. Speaking to Scan TV, he said that “in a cost-benefit analysis, the costs could be much higher than the benefits calculated on paper” and called for a more detailed assessment of effects on business competitiveness before the measures are implemented.
The small business and freelancer problem
Of all the measures in the package, the reduction of the mandatory VAT registration threshold has generated the most sustained concern from independent professionals and small operators.
The mechanics are straightforward: by lowering the threshold from 10 million to 5 million lek in annual turnover, the government brings an estimated 17,500 additional taxpayers into the formal VAT system. Officials describe this as a compliance measure designed to broaden the tax base and limit avoidance.
The practical consequences, however, are considerably more complex. A consultant, lawyer, architect, pharmacist or designer earning between 5 million and 10 million lek per year will, from Jan. 1, 2027, be required to register for VAT, file quarterly returns, maintain compliant records and, in most cases, take on additional accounting costs. If their clients are private individuals or businesses unable to reclaim VAT, those professionals face a direct choice: absorb the costs or raise prices. For those operating in competitive markets with limited pricing power, neither option is simple.
As lawmakers Tabaku and Bozdo have noted, the measure risks pushing some of those affected toward informal arrangements, particularly if compliance costs prove disproportionate to turnover. The government disputes that assessment, arguing that bringing more businesses into the formal system is a necessary step toward greater tax equity and improved compliance. Whether the enforcement capacity exists to make the expanded system function effectively is a separate question that critics, including Gjokutaj, say has not been adequately addressed.
What comes next
The fiscal package now moves to parliament, where the proposed changes will be examined before their anticipated introduction in January. The government’s parliamentary majority gives it the political capacity to adopt the package as drafted, but opposition from business organizations could increase pressure for revisions.
The fiscal debate is also unfolding against a backdrop of prolonged political unrest. Student-led demonstrations have continued in central Tirana and have spread to other cities, with protesters demanding Rama’s resignation and setting fire to government buildings and banks in earlier, more violent incidents. Rama has called on students to engage in dialogue and introduced economic measures including cheaper fuel and increased assistance for low-income families in an effort to ease tensions. Whether those concessions alter the political dynamic around the broader fiscal package remains to be seen.
Three questions will define whether the package achieves its stated objectives. The first is whether the food VAT reduction translates into actual price reductions at the retail level, or whether it is absorbed by intermediaries. The second is whether bringing roughly 17,500 additional businesses and professionals into the VAT system improves fiscal compliance without placing a disproportionate burden on smaller operators. The third is whether the higher dividend tax and the new high-income salary bracket affect investment and employment decisions in an economy that is growing but remains sensitive to comparisons with regional peers.
What is already clear, before parliamentary debate begins, is that the package has generated an unusually broad coalition of critics: formally operating businesses, independent professionals, foreign investors, tourism operators and, with the disruption of parliament on Oct. 29, a political opposition that shows no sign of moderating its disagreement with the government’s economic program.
The post Albania’s 2027 Fiscal Package Sparks Backlash Over Higher Taxes and Investment Risks appeared first on Tirana Times.
