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Kosovo's Fiscal Policy Causes Adverse Reactions |
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Saturday, 11 February 2012Kosovo's government has undertaken several measures to boost economic growth, but some businesses are complaining that an increase in the tobacco excise tax and high food prices are pushing customers to the black market.
The government reforms simplify import-export procedures, remove the value added tax (VAT) for the media and allow businesses to pay excise tax on tobacco products after they place them on the market.
The government plans to lower the VAT for raw materials and packaging, as well as IT equipment, and reduce the interest on debt owed to the Kosovo Tax Administration, Finance Ministry spokesperson Muharrem Shahini told SETimes.
"The measures are intended to support the business community, to put domestic producers on equal footing with importers," he said.
But the government increased the excise tax on tobacco from 25 to 27 euros per kilogram and left the 16% VAT on food unchanged, although some campaigned for a tax cut. The VAT is a tax on profit on a product -- the difference between what an item costs to manufacture and the price for which it is sold. Collections occur every time a business in the supply chain purchases or produces a product and resells it.
Pristina-based Economic and Social Studies Institute economist Liridona Konushefci told SETimes she welcomes the changes, but said business owners fear the government is not making clear the excise on packaging and raw materials.
"This may affect negatively the business community because the government may increase the excise on those materials," she said.
Shop owners say the increase in the excise on tobacco may end up costing them customers and boosting the black market.
"Smugglers sell at lower prices without paying excise and other obligations as we do, and this makes consumers [shop elsewhere]. Those who sell in the streets across from the markets and at every corner are a challenge to us," Pristina tobacco shop owner Dukagjin Shala said.
Shala explained he increasingly sees disappointed consumers given the tobacco excise increase but said sellers also used the opportunity to increase prices and profits.
Konushefci said she understands the shop owners' fears, but said smuggling and black marketeering affect the whole economy.
"It causes a negative effect to the business community, but also damages the state budget. The police and tax administration need to be more active to [suppress] them," she said. |
Saturday, 11 February 2012
Setimes
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