Albania - Politics, government, and taxation

Albania is a parliamentary democracy with a unicameral (1-house) 155-member parliament. The president is the head of state, but the prime minister is the executive head of government. The 2 major parties are the left-of-center Socialists (reformed communists) and the right-of-center Democratic Party. In the 1997 elections, the socialists won 101 seats, blaming Sali Berisha, the first post-communist president, and his democrats for the financial pyramid scams, economic chaos, rampant corruption, authoritarianism, and fraud. The socialists, whose power base lies mostly in the south, formed a coalition with the center-left social-democrats (8 seats), the small, predominantly ethnic Greek Human Rights Party (4 seats), and the smaller centrist Democratic Alliance (2 seats). They have a chance of remaining in office at the election in mid-2001. The democrats, whose power base is mainly in the north, retained 27 seats in parliament.

In early 2001, the state's role in the economy was diminishing, but the government was still highly centralized and financial resources were concentrated at the national level. In an attempt to attract foreign investors, Albania planned to create free-trade zones and companies operating in them would be exempt from import duties and a value-added tax (VAT) but not from taxes on profits. In order to curb the budget deficit , the government nearly doubled the VAT to 20 percent and increased excise taxes in 1997. The tax share of GDP was set to 22 percent in the 2001 budget, close to the norm for other economies making the transition from a communist to a market system. Albania had a foreign debt of US$820 million in 1998, which was not considered disproportionate.