TIRANA, Nov 7 /ATA/ Redistributing the benefits of economic growth among citizens, lowering the cost of essential goods, increasing pensioners’ incomes and supporting households and businesses are among the key priorities of the 2027 Draft Budget and Fiscal Package.
In an interview with the Albanian Telegraphic Agency (ATSH), Minister of Economy and Innovation Delina Ibrahimaj said that next year’s economic and fiscal policies aim to ensure that economic growth is reflected not only in macroeconomic indicators but also in higher disposable incomes and lower living costs for citizens.
According to Ibrahimaj, sustained economic growth, employment expansion and increased budget revenues have created additional fiscal space for measures aimed at broadening the distribution of economic gains, with targeted support for pensioners, middle-income households, young families and businesses.
“While stimulating economic growth remains essential, its benefits must translate into tangible improvements in the disposable income of every Albanian citizen. The 2027 Budget is fundamentally geared towards redistributing economic welfare. Both the Budget and the Fiscal Package introduce a reallocation of the tax burden, aimed at boosting household incomes and reducing expenditure pressures on citizens,” Ibrahimaj said.
Ibrahimaj said that the Ministry of Economy and Innovation has been allocated approximately ALL 42 billion for 2027, around 70% of which will be directed towards financing the social insurance and pension schemes.
A key provision of the 2027 Fiscal Package is the reduction of VAT from 20% to 6% on 54 essential food items, including bread, flour, milk, eggs, rice, pasta, cooking oil, meat, fish, fruit and vegetables.
The measure aims to reduce the tax burden along the supply chain, paving the way for an estimated 11–12% decrease in the prices of basic food products and delivering direct savings to consumers, Ibrahimaj said.
However, the minister stressed that ensuring consumers benefit from the VAT reduction will require price monitoring across all stages of the supply chain, to ensure that the tax cut is passed on to final retail prices rather than absorbed into commercial profit margins.
To this end, Ibrahimaj said the Ministry of Economy and Innovation is using the “Price Monitor” platform, which enables prices to be tracked throughout the supply chain, from importers and manufacturers to retailers..
The platform also incorporates electronic invoicing and fiscalisation data, allowing authorities to compare prices declared by businesses with actual invoices and pinpoint the stages of the supply chain where the highest costs and profit margins are generated.
Ibrahimaj noted that price surveillance had been launched ahead of the measure’s entry into force to guard against speculative price hikes in the months leading up to its implementation, which could undermine the benefits of the VAT cut from 1 January 2027.
“Our main concern is that businesses may artificially raise prices beforehand, only to reduce them after 1 January, when the lower VAT rate takes effect. We are alert to this risk and are closely monitoring price developments,” the minister said.
She stressed that the government’s objective is to ensure that the financial benefits of the VAT reduction are passed on to consumers rather than translating into additional revenue for retailers.
The fiscal impact of reducing VAT on food products is estimated at around ALL 12.8 billion. Meanwhile, raising the standard VAT rate from 20% to 21% on other products is expected to generate approximately ALL 10 billion in additional budget revenue.
The minister explained that the impact of the one-percentage-point VAT increase on other products would be more limited for household budgets than the anticipated savings from the VAT cut on essential food items, particularly for lower-income households.
The 2027 Fiscal Package also provides for a reduction in the VAT registration threshold from ALL 10 million to ALL 5 million in annual turnover.
Ibrahimaj explained that the change will extend VAT registration requirements to a wider range of businesses, without necessarily creating an additional tax payment obligation for every newly registered entity.
She clarified that the revised VAT threshold does not alter the corporate income tax threshold, which remains unchanged at ALL 14 million in annual turnover. The two tax obligations are subject to separate regulatory frameworks and eligibility thresholds.
“We have not changed the corporate income tax rate or its threshold, which in Albania stands at ALL 14 million in annual turnover. Businesses pay VAT on the difference between their purchases and sales. In other words, VAT is calculated on a net basis, with businesses paying only the difference between the VAT collected on sales and the VAT paid on purchases,” the minister explained.
According to Ibrahimaj, lowering the threshold is intended to eliminate competitive advantages enjoyed by businesses operating outside the VAT system while offering the same products and services at prices comparable to those charged by VAT-registered businesses.
She also noted that experience to date has shown that businesses leaving the VAT system have not necessarily passed on the change through lower prices for consumers.
“In Albania, this does not happen. Prices remain the same regardless of whether a business is VAT-registered or not, with both charging comparable prices for the same products and services. The difference attributable to VAT is retained by the business owner. This is neither fair nor equitable; it amounts to tax evasion,” she said.
The minister stressed that maintaining a higher registration threshold for genuinely micro-sized businesses is intended to prevent additional administrative costs associated with VAT reporting. However, technological advances and online filing systems now make it easier for businesses brought into the VAT system to manage their tax obligations.
The 2027 Fiscal Package also provides for the abolition of the fuel turnover tax, with the aim of lowering the price consumers pay when filling up with diesel or petrol.
According to the minister, the measure is expected to reduce pump prices by ALL 32 per litre.
Ibrahimaj said that fuel prices would be subject to continuous monitoring to ensure that the reduction is passed on to consumers. The government is also considering establishing a permanent transparency mechanism to ensure that the price cut is sustained over time rather than being reflected only initially.
She noted that the sector currently operates under the Transparency Board regime due to price volatility stemming from the crisis in the Middle East.
The tax will not be abolished but will instead be paid separately, alongside other annual vehicle-related charges, through the relevant structures of the General Directorate of Road Transport Services.
Minister Ibrahimaj said the 2027 Draft Budget earmarks around ALL 24 billion to double monthly pension supplements across all categories and adjust pensions for inflation from January 2027. She also noted that the change in tax collection methods is expected to reduce budget revenues by around ALL 5 billion, but stressed that the measure is necessary to ease the burden on citizens amid high fuel costs.
The Minister said the measure aims to gradually increase pensioners’ incomes towards government targets, with urban pensions based on full contribution records reaching at least ALL 40,000 and partial pensions at least ALL 22,000 by the end of the government’s term. She also announced that monthly supplements would be doubled in 2027 and pension indexation brought forward to 1 April, instead of October.
According to the Minister, the projected cost of pension indexation in 2027 is around ALL 4 billion. Ibrahimaj also said the government aims to finalise the pension scheme reform in 2027, with implementation of the changes expected to begin in early 2028.
The 2027 Draft Budget also allocates additional funding to promote youth employment and expand vocational training programmes. Ibrahimaj said the Youth Guarantee, following a two-year pilot phase, would be rolled out nationwide, aiming to ensure that every young person under the age of 29 receives an offer of employment or vocational training.
The 2027 Draft Budget provides for expanded youth employment programmes, including nine-month subsidies covering half the minimum wage for young people and graduates. It also introduces affordable housing measures, including 2,000 zero-interest apartments, 2,000 subsidised loans with interest rates of up to 3%, and rental subsidies covering half the cost for students and young professionals.
Ibrahimaj said the measures aim to ease one of the main financial burdens on young people, students and young families, creating better opportunities to start families and build financially stable lives.
Another measure under the 2027 Fiscal Package concerns the income tax threshold for employment income subject to the 13% rate, which will rise from ALL 200,000 to ALL 300,000 per month. Salaries exceeding ALL 700,000 per month will be subject to a 30% tax rate.
Minister Ibrahimaj said the change aims to increase the net income of skilled employees and professionals, including doctors, engineers and IT specialists. Describing it as a measure to support the middle class, she said it reflects the government’s approach to progressive taxation, under which higher earners contribute more while measures seek to boost the disposable income of middle-income workers and professionals.
Ibrahimaj said the 2027 Budget aims to translate Albania’s sustained economic growth of 3.5–4% into improved living standards by reducing household costs, increasing disposable incomes and supporting employment, housing and economic opportunities.
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