The Impact of High Taxes on Free Professions and the Role of Financial Consultation
The recent implementation of income tax laws for self-employed professionals in Albania has sparked concerns and raised significant challenges, particularly for liberal professions such as psychologists and lawyers. The tax burden imposed by these laws has been described as excessively high, with professionals facing the risk of bankruptcy and financial management challenges.
According to a report by "Monitor," self-employed professionals like psychologists could be paying up to 1,000 euros per month in taxes to the state. This calculation method, which doesn't account for various expenses like fuel costs for travel or changes in workload, is seen as unfair and unsustainable. Many professionals fear that such high taxes could force them to close their businesses as they become unaffordable to sustain.
Even professions like law, represented by individuals like J.K., are feeling the strain of these tax obligations. With an annual tax of 9,000 euros or 1,000 euros per month, professionals express concerns about having to work extensively just to meet these tax payments, impacting their financial stability and growth prospects.
The impact extends beyond individual professionals to entire industries, such as the IT services sector. The introduction of taxation ranging from 15% to 23% for liberal professions is expected to have adverse effects on IT companies and self-employed IT professionals. Aleksandër Risilia, director of "Ritech," a company providing IT services, highlights how these taxes will burden IT companies and increase the cost of services, making them less competitive compared to neighboring countries like Kosovo and North Macedonia.
Moreover, the taxation system's lack of progressive elements is seen as detrimental, particularly for young professionals and startups. Enida Bozheku, a lawyer and legal lecturer, criticizes the absence of progressive taxation, which would consider factors like age and experience in determining tax rates. She argues that such a system would protect young professionals and encourage innovation and entrepreneurship, crucial elements for economic growth.
The impact of high taxes on liberal professions goes beyond financial strain. It also raises concerns about tax evasion and informality. A survey conducted by the Investment Council Secretariat indicates that nearly half of the surveyed enterprises believe that the new income tax laws will increase informality in the country. This sentiment is echoed by accountants and lawyers, who foresee increased evasion and challenges in tax compliance due to the unfair tax burden imposed by the current system.
In light of these challenges, there is a clear need for financial consultation services tailored to the needs of self-employed professionals and liberal professions. Such services can help navigate complex tax regulations, optimize financial management strategies, and provide insights into legal avenues to reduce tax burdens. Additionally, advocating for a more progressive and fair taxation system that considers the economic realities of different professions and encourages entrepreneurship can contribute to a more sustainable and vibrant business environment in Albania.
For over 20 years, HLB Albania has been a trusted provider of comprehensive tax, legal, financial, M&A, and other advisory services. Our team of experts is dedicated to helping businesses navigate the complexities of the financial landscape, ensuring compliance with regulations, optimizing tax strategies, and facilitating mergers and acquisitions for growth and success.
Whether you're a multinational corporation, a small or medium-sized enterprise, or an individual entrepreneur, HLB Albania offers tailored solutions to meet your specific needs and goals. Our commitment to excellence and client satisfaction has earned us a reputation as a leading advisory firm in Albania.
If you're interested in exploring how HLB Albania can support your business or personal financial objectives, we invite you to visit our website at www.hlb.al/services.
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