Some observations on the implementation of progressive and ?at taxes in the Albanian tax system

• Author: Irma Guga
• Pages: 36-44

Vo

l. 4 N

o

. 2

J

uly, 2018

A

cademic Journal of Business,

A

dministration, Law and Social Science

s

II

PCCL Publishin

g

, Graz-

A

ustri

a

ISS

N 2410-391

8

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cces on

l

ine at www.ii

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cc

l

.or

g

36

Some observations on the implementation of progressive and fl at taxes in the

Albanian tax system

P

h

D (C.) Irma Gu

g

a

Ab

str

a

c

t

A

ll taxes discourage something. Why not discourage bad things like pollution rather than

g

ood thin

g

s like workin

g

or investment? –

a

w

e

ll-kn

o

wn

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m

e

r

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c

a

n

e

c

o

n

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m

i

st L

a

wr

e

nc

e

Su

mm

e

rs h

a

s st

a

t

e

d.

B

ut anyway, as Benjamin Franklin wrote in a 1789 “…in this world nothing can be said to

b

e certain, except death and taxes”.

I

n these circumtances, taxation is a phenomenon that no

o

ne can avoid, but anyway every system should follow the canons of taxation for e cient

economic administration as well as for avoiding unnecessary hardships to those who have no

c

apac

i

ty to pay

.

A

d

a

m

S

mith

(

1778

)

identi

fi

e

d

f

our

f

amous canons o

f

taxation that are important even

nowadays:

E

quity: The sacrifi ce of all citizens must be equal

;

C

ertainty: The tax which each individual is bound to pay ought to be certain and not arbitrary

;

C

onvenience:

A

good taxation policy must be convenient for the tax payer

;

E

conomy: The cost of collecting tax should be the minimum;

This paper aims the identifi cation of e ects of progressive and fl at tax implemented in

A

lbania

d

uring last decade. This can be achieved by analyzing,

p

ersonal income tax revenues and tax

revenue, for three periods during 2010-2017.

T

he analysis will consist in comparing budget

r

evenues generating

f

rom personal income tax as part o

f

total revenue,

f

or periods be

f

ore

and a er progressive tax implementation. From this we can fi nd out if there are important

di



e

r

e

nc

es

a

nd wh

i

ch

is

th

e

tr

e

nd. The analysis will be carried out through graphs and

comparative analysis of time series of revenues from personal income tax as part of total

revenue for above mentioned periods.

K

e

y

words: progressive tax, fl at tax, fi scal system, marginal tax.

Introduction

Literature in the economic fi eld has considered e ciency and equity as two important

goals of economic development. The relationship between these two objectives is

well known: policies tend to increase e ciency, but it is also possible to increase

inequality. The issue of efi cciency-equity relationship is especiallly expressed in

income tax (Mirr

l

ees 1971; Ramse

y

1927).

It has commonly been assumed that e ciency is best achieved by the simple use

of the amount of tax that does not distort the choice that individuals have made.

Meanwhile, vertical equality requires a progressive tax schedule accompanied by

specifi c individual discounts, and returns.

I

n that case

,

it is said that e



cient taxes

re

d

uce e

q

ua

l

it

y

an

d

vice versa. According to fi nancial literature, there are established

four tax systems (tari s), based on fees applied and taxation calculations: proportional,

progressive, regressive and fl at tax.