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1
June, 2017
This publication was produced for review by the United States Agency for International Development. It was prepared by Tetra Tech ARD.
PLANNING AND LOCAL GOVERNANCE PROJECT IN ALBANIA
STATISTICAL BRIEF
ALBANIAN LOCAL GOVERNMENT FINANCE AFTER TERRITORIAL ADMINISTRATIVE REFORM AND ON THE EVE OF THE IMPLEMENTATION OF THE LOCAL GOVERNMENT FINANCE LAW
ALBANIA
Prepared for the United States Agency for International Development, USAID Contract Number AID-182-C-12-00001 Prepared by: Tony Levitas
Senior Research Fellow Watson Institute for International Studies Brown University Elton Stafa PLGP Municipal Finance Expert
Tetra Tech ARD Contact: Adrienne Raphael Project Manager [email protected] PLGP Contact: Kevin McLaughlin, Chief of Party [email protected] Tetra Tech ARD Home Office Address: Tetra Tech ARD
159 Bank Street, Suite 300, Burlington, VT 05401 Tel: (802) 658-3890, Fax: (802) 658-4247 www.ardinc.com
PLANNING AND LOCAL GOVERNANCE PROJECT IN ALBANIA STATISTICAL BRIEF
Albanian Local Government Finance after Territorial Administrative Reform and on the Eve of the Implementation of the Law on Local Government Finance
June, 2017
DISCLAIMER
The authors’ views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.
STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE EVE OF TERRITORIAL CONSOLIDATION i
CONTENTS
ACRONYMS AND ABBREVIATIONS ........................................................................................................................ iii
EXECUTIVE SUMMARY ........................................................................................................................................... 1
1. INTRODUCTION .................................................................................................................................................. 5
2. TOTAL LOCAL GOVERNMENT REVENUE.............................................................................................................. 7
3. THE COMPOSITION OF LOCAL GOVERNMENT REVENUE .................................................................................... 9
4. LOCAL GOVERNMENT EXPENDITURE ............................................................................................................... 18
5. THE DISTRIBUTION OF LOCAL GOVERNMENT REVENUES AND EXPENDITURES ................................................ 22
6. THE LAW ON LOCAL GOVERNMENT FINANCE AND ITS IMPACT ON MUNICIPAL BUDGETS ............................... 29
7. NEXT STEPS ...................................................................................................................................................... 33
APPENDIX 1: COMPOSITION OF LOCAL GOVERNMENT REVENUES IN 2016 ................................................................ 39 APPENDIX 2: COMPOSITION OF LOCAL GOVERNMENT EXPENDITURES IN 2016 ......................................................... 41
LIST OF FIGURES
Figure 1: Local Government Revenue as a Share of GDP and Total Public Revenue in South-Eastern Europe (2015) ..................................................................................................................................................................... 7
Figure 2: Local Government Revenue as a share of GDP and Total Public Revenue 2002-2016 ................................ 8 Figure 3: The Composition of Local Government Revenues (BN ALL) ........................................................................ 9 Figure 4: Composition of Basic Local Government Revenues as % of Total 2002-2016 ........................................... 10 Figure 5: The Composition of Local Government Revenues in South-East Europe in 2015 ..................................... 11 Figure 6: Composition of Local Government Revenues in Albania in 2016 Compared to SEE Average in 2015 ...... 13 Figure 7: The Composition of Own-Revenue 2002-2016 (billion ALL) ...................................................................... 13 Figure 8: The Composition of Local Government Own-Revenue as a Percentage of Own-Revenue ....................... 14 Figures 9 & 10: The Property Tax as % of GDP and Local Government Own Revenues in SEE 2006 and 2015 ........... 15 Figures 11 & 12: Total Local Government Expenditure, in Billion ALL and as a Percentage of Total, 2011-2016 ....... 18 Figures 13 & 14: Local Government Expenditure from Freely Disposable Revenues, Billion ALL and as a Percentage
of Total 2011-2016..................................................................................................................................... 19 Figures 15 & 16: Composition of Local Government Investment Spending from Freely Disposable and Grant
Funding by Functional Classification, 2011-2016 (BN ALL) ........................................................................ 20 Figures 17 & 18: Composition of Local Government Spending by Functional Classification, 2011-2016 in Billions of
ALL and as a Share of Total. ....................................................................................................................... 21 Figure 19: Projected Increase in Transfers Resulting from the LGFL ........................................................................... 31 Figure 20: Projected Total Local Government Revenues Resulting from the LGFL ..................................................... 32
LIST OF TABLES
Table 1: Per Capita Revenues of Municipalities by Quartiles Organized by Per Capita Own-Revenue in 2016 .......... 23 Table 2: local government revenues per capita by quartiles based on population 2016 ............................................ 25 Table 3: The Composition of Per Capita Own-Revenues in 2016 by Quartiles based on Per Capita Own Revenues .. 27 Table 4: The Composition of Per Capita Local Government Expenditure by Quartiles based on Per Capita
Expenditure without Conditional Grants in 2016 ...................................................................................... 27
STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE EVE OF TERRITORIAL CONSOLIDATION iii
ACRONYMS AND ABBREVIATIONS
ALL Albanian Lekë
BN Billion
EU European Union
FY Fiscal Year
GDP Gross Domestic Product
GoA Government of Albania
IPA Instrument for Pre-Accession Assistance
IPT Immovable Property Tax
LGFL Law on Local Government Finance
LGU Local Government Unit
MoF Ministry of Finance
NALAS Network of Associations of Local Authorities of South-East Europe
PIT Personal Income Tax
PLGP Planning and Local Governance Project
PPP Public-Private Partnership
RDF Regional Development Fund
TAR Territorial and Administrative Reform
USAID United States Agency for International Development
USD U.S. Dollars
USG United States Government
1
EXECUTIVE SUMMARY
This brief presents an overview of the evolution and current status of local government finance in
Albania today. Its purpose is to give policy makers and stakeholders a picture of local government
finance in the aftermath of the Territorial and Administrative Reform (TAR) and on the eve of the
implementation of the new Law on Local Government Finance (LGFL). The report makes the
following main points:
• The 2015 TAR consolidating 373 local governments into 61 municipalities has been followed
by an improvement in the collection of local taxes, fees, and charges. There has also been a
decline in expenditure on public administration relative to the cost of the total amount of
services municipalities have to provide.
• As such, territorial consolidation seems to have produced some gains in the efficiency and
effectiveness of local governments. But definitive judgments are premature because the gains
are uneven across municipalities and because there are questions about whether some of them
are adequately servicing their newly incorporated rural areas. Going forward, operating costs
–and with them expenditures on public administration, are also likely to rise as municipalities
increase the quantity and improve the quality of local public services.
• The accounting and reporting of local government financial data by the Ministry of Finance
(MoF) has improved. MoF now reports municipal revenue without including social transfer
payments to poor households, payments made through their budgets but over which they have
no control. Expenditures can now also by examined by both economic and functional
classifications. Access to the revenue and expenditure data of municipalities should be made
available to the Municipal Associations, the new Consultative Council, as well as to
universities and think tanks.
• Following the 2015 passage of the Law on Local Self-Government, new responsibilities in
preschool education, fire protection, environment, forestry and irrigation were devolved to
municipalities. To pay for these new functions the national government added about 6 billion
lekë (ALL) into the transfer system. As a result, local government revenue as a share of total
public revenue increased from 9.8% to 11.8% between 2015 and 2016, and as a share of GDP
from 2.6% to 3.2%. Despite these gains, however, Albanian local governments still receive
substantially less public revenue than their counterparts in the region.
• The Albanian intergovernmental finance system remains very heavily dependent on
Conditional Grants for investment. Over the last decade, successive national governments have
chosen to use these grants to provide local governments with between 25% and 30% of their
total revenue. The dependency of municipalities on these grants for so much of their revenue
2 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
distorts local priorities, undermines good financial planning, and weakens the independence of
local officials vis-a-vis the national government.
• The consolidation of local governments in 2015 was accompanied by the introduction of a new
formula for allocation of the Unconditional Grant in 2016. But because the national
government decided not to increase the size of the Unconditional Grant, MoF imposed “hold
harmless” provisions on the application of the new formula. As a result, the least populous –
but often far from the poorest—municipalities have continued to receive a disproportionate
share of the grant. This has preserved the bias of the old formula against densely populated
urban areas despite territorial consolidation.
• The 2017 passage of the Law on Local Government Finance (LGFL) marks a major milestone
in the development of Albania’s intergovernmental finance system. The law will stabilize and
substantially increase municipal revenues by: i) anchoring the size of the Unconditional Grant
at no less than 1% of GDP; ii) giving municipalities a 2% share of the Personal Income Tax
(PIT) generated on their territories; and iii) expanding their share of the Vehicle Tax from 18%
to 25%.
• The Law also clearly identifies the Property Tax as the most important local tax, defines how
newly devolved functions should be financed until they can be considered true own-functions,
introduces new principles for local public financial management, and requires the development
of financial recovery plans for municipalities in financial distress.
• To consolidate the gains of the last few years, the LGFL will have to be properly implemented
and complemented by efforts to strengthen local government tax powers. This will require
close cooperation between the national government and local governments in the Consultative
Council established by new Law on Local Self-Government. Work in the following areas
should begin as soon as possible to ensure that the promise of the recent reforms is fully
realized.
o The “hold harmless” provisions imposed on the Unconditional Grant in 2016 and 2017
should be lifted and the specific weights and brackets needed allocate the Grant in 2018
should be agreed upon with the Consultative Council. To the greatest possible extent, these
weights and brackets should be defined so as to correct the anti-urban bias of the old
formula.
o To ensure that PIT-shares can be properly returned to their place of origin, MoF needs to
be able to identify PIT by the municipality in which taxpayers/employees reside. MoF and
the Road Directorate also need to develop procedures that guarantee that the Vehicle Tax
is attributed to place of residence of the vehicle owner.
o The 2015 Law on Local Self-Government devolved new functions to local governments in
the areas of pre-school education, fire protection, forestry and irrigation. The Law states
that these should be considered local government own-functions and thus financed from
freely disposable general revenues. At the same time, however, both the Local Self-
3
Government Law and the Local Government Finance Law allow these functions to be
financed by “Specific (conditional) Transfers” for a transitory period of up to three years.
This was done for two reasons: to give policy makers time to harmonize sectorial
legislation with the actual devolution of these responsibilities; and to ensure that all
municipalities actually have the infrastructure necessary to provide the concerned services.
Both tasks will require time and energy. The national government should be prepared to
provide investment support to those municipalities that currently lack the infrastructure to
provide the newly devolved functions. Work to develop plans for the full devolution of
each of these functions should be begun as soon as possible.
o To implement the new financial management rules contained in the LGFL, MoF needs to
develop a range of new formats, templates and procedures. These should be discussed with
the Consultative Council and carefully communicated to municipalities.
o The LGFL requires municipalities that have substantial payment arrears to develop and
implement financial recovery plans. It also requires MoF to monitor these plans and to take
remedial action if the plans fail to have their desired effects. Because senior MoF officials
report that 6 to 10 municipalities may already be close to insolvency, it is very important
that MoF and the Consultative Council elaborate the rules and procedures necessary to
negotiate this new and highly contentious terrain.
o In light of the LGFL’s identification of the Property Tax as the single most important
source of local tax revenue, the GoA is currently considering developing a national fiscal
cadaster to facilitate the registration, valuation and billing of the tax. This is a good idea
because it should reduce the cost of administering the tax and help standardize local
practices. A central registry of all properties and their users should also help with the fair
and equitable imposition of other local taxes, fees and charges. But the experiences of both
Kosovo and Republika Srpska suggest that even the creation of technologically
sophisticated central cadasters do not immediately produce dramatic improvements in the
yield of the tax if local officials are not committed to using the tax and have reasonable
enforcement powers. The experiences of other countries in the region also suggest that
Albanian policy makers should not expect the tax to generate revenue greater than 1% of
the GDP any time soon.
o Historically, the Albanian intergovernmental finance system has made excessive use of
Conditional Grants –through the Regional Development Fund– to provide local
governments with investment funds. Both ruling coalitions have used the investment grants
as much for political purposes as for developmental ones. Grants have also been given
disproportionately to small, but not necessarily poor municipalities (mainly for roads) as
opposed to larger, poorer municipalities with pressing network infrastructure needs.
Municipalities should be aware of the possible shrinking of the Regional Development
Fund over the next couple of years, as presented in the GoA’s Macroeconomic and Fiscal
Projections for 2018-2020. Nonetheless, the Fund is likely to remain an important source
4 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
of investment funding over the foreseeable future and efforts need to be made to ensure
that its allocation in not only fair and transparent, but clearly aligned with country’s most
important development needs, that should be specified by the Consultative Council.
o The LGFL, by stabilizing the foundations of the intergovernmental finance system, should
make municipalities more creditworthy. In light of this, the GoA should consider loosening
restrictions on local borrowing. Creditworthy municipalities should be allowed to make
effective use of their right to borrow while national government investment grants should
be directed predominantly towards poorer jurisdictions. The GoA should also continue its
efforts to reduce the borrowing of the national government because at present Albania’s
total public debt as a percentage of GDP (71%) significantly exceeds the limits set by the
European Union’s Maastricht Treaty (60%). As result, national government borrowing
continues to crowd out local debt financing.
5
1. INTRODUCTION
This brief presents an overview of the evolution of local government finance in Albania over the
past decade. It has two central purposes. The first is to examine changes in the financial position
of local governments since the 2014 passage of the Law on Territorial and Administrative
Division1. This law consolidated 373 local governments (67 municipalities, 306 communes) into
61 larger municipalities. The second is to highlight some of the changes and challenges that will
accompany the implementation of the 2017 Law on Local Government Finance (LGFL).
Together with the new Law on Local Self-Government of 2015, these laws constitute the legal
foundations of Albania’s efforts to radically overhaul its system of subnational governance as
defined in the “National Cross-Cutting Strategy on Decentralization and Local Government.”2
This strategy set three major objectives for the new system of public administration: to increase
the effectiveness and responsiveness of local governments by concentrating human and financial
resources in a smaller number of larger democratically-elected units; to improve the efficiency of
local public services by lowering administrative costs; and to help ensure the balanced and
sustainable growth of the country by providing subnational governments with the skills and
resources necessary to deliver improved public services to their citizens and businesses.
It is too early to assess the degree to which these goals will be met. But there is no question that
the legal order that has been put in place over the last few years represents a substantial
achievement in Albania’s continuing effort to both democratize its public sector and to improve
the quality of public services. At the same time, the new legal framework does not automatically
resolve all the problems inherited from the past, and the creation of a new, more dynamic
subnational order must be followed by further reforms if its promise is to be fully realized.
The first section of the Brief, tracks the evolution of local government finance in Albania over the
last 10 years, paying particular attention to the changes that have occurred since territorial
consolidation and the passage of the new Law on Local Self-Government3. Where possible and
appropriate it compares the revenue and expenditure of Albanian local governments with their
counterparts in the region. In the concluding sections, the Brief presents some simulations of the
1 Law 115/2014 on the “Territorial and Administrative Division of Local Government Units in the Republic of Albania” July, 2014
2 Council of Ministers, “National Crosscutting Strategy For Decentralization and Local Governance” July 2015, pp. 1-99
3 Tony Levitas “Statistical Brief: Albanian Local Government Finance on the Eve of Territorial Consolidation” PLGP/USAID
September 2014 pp. 1-38
6 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
major financial changes that can be expected to accompany the implementation of the LGFL as
well as some of the challenges that need to be addressed to consolidate the reforms.
The data used in the report comes from the Albanian Government Financial Information System
(the Treasury System) for the period 2011-2016 and is based on actual end-year figures. In the
report, we have excluded social welfare payments to poor families from the Ministry of Social
Welfare, payments that flow through local governments but over which they have no control.
These transfers are substantial, amounting to about 20 billion ALL a year.
Total local government revenue thus includes (1) revenues collected or raised by local government
themselves (Own-revenues); (2) freely disposable intergovernmental transfers (Unconditional
Grants and Shared Taxes); (3) Conditional Grants from line ministries and the Regional
Development Fund for local government own-functions, or functions which local governments
continue -de facto- to share with the national government (e.g. transport, education, water supply
and sewage)4. But it excludes revenues that flow through local government budgets for delegated
functions like the payment of social welfare transfers, and the operation of Civil Status Registry
Offices and National Business Centres.
Total local expenditure refers to expenditures financed from own revenues, freely disposable
transfers, and conditional grants from both line ministries and the Regional Development Fund.
But as on the revenue side, it excludes resources transferred for (or spent on) the delegated
functions described above. It is also important to note that most of the national investment funds
that go to local governments for education infrastructure and other important local public services
come from the Regional Development Fund. Nonetheless, they are accounted for in the Treasury
system as Conditional Grants from line ministries.
The revenue and expenditures of Qarks (regions) are excluded from the data and not considered in
the report because with municipal consolidation this level of government has become significantly
less important and now accounts for less than 5% of all subnational spending. The population
numbers used to calculate per capita revenues and expenditures are from the 2011 census.
4 We use the phrase de facto here because the new 2015 Law on Local Self Government eliminated the category of shared functions
from the catalog of possible intergovernmental arrangements. See the discussion of “Specific Transfers” on pages 11 and 12 below,
as well as in the concluding section of the Brief.
7
2. TOTAL LOCAL GOVERNMENT REVENUE
Figure 1 below, compares the total revenue of local governments in Albania as both shares of GDP
and total public revenue with the same indicators for local governments elsewhere in South-East
Europe in 2015. In countries marked with an asterisk, local governments pay for the full costs of
running primary and secondary schools including teachers’ wages. As a result, in these countries
the share of local government revenue as percentage of total public revenue is higher than the
average for the region. Indeed, in Kosovo and Romania, it is higher than the EU average despite
the fact that both countries have relatively small public sectors. This is largely because in Kosovo
and Romania, local governments also pay for the full costs of primary health care facilities,
including the wages of doctors and nurses.
Figure 1: Local Government Revenue as a Share of GDP and Total Public Revenue in South-Eastern Europe (2015)
*Countries in which local governments are responsible for primary education and in some cases primary health care. See NALAS,
Fiscal Decentralization Indicators in South-East Europe, 2016. Albanian data does not include Qarks; Romanian data includes
county level governments (judets).
As can be seen from the Figure, the overall size of Albania’s public sector is small (26%),
suggesting that the national government has difficulties in collecting taxes. Municipalities also
play a limited role in the country’s governance structure as can be seen from the fact that local
government revenue is equal to only 9.8% of total public revenue and 3.2% of GDP. Indeed, by
both measures Albania ranked last in the region, despite the fact that in a number of other countries
local governments are responsible for a similar set of public services. As such, it is fair to say that
2.6% 3.9% 4.7% 5.0% 5.9% 5.8% 6.1% 6.3% 6.7% 6.3% 6.6% 5.4%7.6%
10.1% 11.2%
26%
39%
43%
38%
42% 41% 42% 43% 44%
37% 38%
31%
25%
33%
45%
9.8% 10.2% 11%13.1% 14.0% 14.2% 14.5% 14.6% 15.3%
17% 17.2% 17.4%
30.3%30.7%
25%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Local Government Revenue as a % of GDP Consolidated Public Reveue, % of GDP
Local Government revenue as a % of Public Revenue
8 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Albanian local governments both play a relatively limited role in delivering public services and
are underfunded when compared to their counterparts in South East Europe.
This however may be changing. Following the 2015 passage of a new Law on Local Self-
Government, municipalities were transferred responsibility for important functions in pre-school
education, fire protection, irrigation and forestry. As a result, in 2016 the national government
increased total local government funding by approximately 6 billion Albanian ALL5. This,
together with improvements in local government own-source revenue and increases in other
intergovernmental transfers led to an increase in municipal revenue as a share of total public
revenue from 9.8% to 11.8% between 2015 and 2016, and from 2.6% to 3.2% of GDP (compare
Figure 1 with Figure 2 below).
Figure 2: Local Government Revenue as a share of GDP and Total Public Revenue 2002-2016
Source: MoF’s Macroeconomic and Fiscal Indicators and the Treasury System. Authors’ calculations.
Thus, after a decade of downward fluctuation, municipal revenue as a share of both GDP and total
public revenue has recovered to their 2007-2008 levels. Moreover, this upward trend continued in
2017, when in anticipation of the passage of the LGFL, the Unconditional Grant was increased by
2.5 billion ALL. Most importantly, this trend should continue: On the one hand, and as we shall
discuss later, the LGFL should further increase and stabilize the Unconditional Grant by specifying
that the grant pool can be no-less than 1% of the GDP, and no less than the amount allocated in
the previous year. On the other hand, and for the first time it assigns municipalities 2% of the
Personal Income Tax (PIT) generated on their territories and expands their share of the revenues
from the Vehicle Tax from 18 to 25%. As a result, the finances of Albanian local governments
should improve in the coming years, and with it their role in the governance of the country.
5 This increase is shown in Figure 3 below as an increase in the Unconditional Grant. As discussed later, (pp. 10 & 15) this
increase will be recorded in the future as “Specific Transfers” and will function primarily as a sectoral block grant for preschool
education.
24.8% 24.1% 24.5% 25.1% 26.0% 26.0% 26.9% 26.1% 26.2% 25.4% 24.8% 24.2%26.3% 26.4% 27.0%
1.9% 2.3% 2.4% 2.3% 3.0% 3.2% 3.1% 2.9% 2.9% 2.6% 2.3% 2.5% 2.8% 2.6% 3.2%
7.8%9.3% 9.8% 9.1%
11.5% 12.4% 11.5% 11.1% 10.9% 10.1% 9.3% 10.4% 10.5% 9.8%11.8%
0%
5%
10%
15%
20%
25%
30%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Public Revenues as % of GDP LG Revenues as % of GDP LG Revenues as % of Public Revenues
9
3. THE COMPOSITION OF LOCAL GOVERNMENT
REVENUE
Figure 3 below, presents the basic composition of local government revenues between 2002 and
2016 in billions of ALL. As can be seen from the figure, there has been a fair amount of fluctuation
in both total revenues and their composition over the last ten years.
Figure 3: The Composition of Local Government Revenues (BN ALL)
Source: MoF’s Macroeconomic and Fiscal Indicators and the Treasury System. Authors’ calculations.
* MSWY stands for Ministry of Social Welfare and Youth.
Own-revenues increased steadily from 2002 to 2008 and have consistently constituted the single
largest source of local government income. In 2008, however, the absolute value of own-revenues
began to decline after the national government imposed restrictions on the ability of local
governments to tax business through the Small Business Tax (SBT)6. This policy was continued
even after a change of government in 2013, and in 2014 the SBT was transformed into a centrally
collected Simplified Profit Tax. Municipalities still receive 99% of this tax on an origin basis, but
it is now imposed on a substantially narrower base7.
Some local governments –led by the capital City of Tirana- responded to the restrictions imposed
on the SBT by using the liberal provisions of the Local Tax System Law to introduce Temporary
6 See Tony Levitas, Local Government Taxes, Fees and Charges in Albania: Current and Future Challenges (Report to the
Albanian Associations of Communes, Swedish Association of Local Authorities) September, 2010, pp. 1-31 7 1% is deducted by the national government as a fee for administering the tax.
39 10 10 12 14 16 14 14 14 13 13 15 14
188
6 6 710
1112 13 12 11 10 12
13 12
18
11
2 1
47
6 6 9 87
810 11
12
0
5
10
15
20
25
30
35
40
45
50
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Own Source Revenues Unconditional Grant Conditional Grants (w/o MSWY)
10 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Taxes that they imposed disproportionately on the business community (e.g. the Temporary Tax
for Greenery, and more recently the Temporary Tax for Educational Infrastructure). In other cases,
local governments responded by introducing new local fees or by increasing the levels of the
existing fees. These changes buoyed the yield of own-revenues even as income from the SBT fell.
Following Territorial Consolidation and the amalgamation of Albania’s 373 local governments
into 61 municipalities in 2015, the collection of own revenues improved significantly in 2016. This
suggests that territorial consolidation has been accompanied by an increase in the effectiveness of
local revenue collection.
The Unconditional Grant rose steadily between 2002 and 2009. But it then became downwardly
unstable. Moreover, between 2009 and 2015, the calculation of the grant became both less
transparent and less unconditional, as categorical transfers were added into the grant pool at the
margins through the annual budget law. The annual budget law defined the size of the grant and,
with the add-ons, amounts that had to be spent on certain earmarked functions. The grant’s
downward instability during this period, however, helped convince local government officials and
national policy makers that a floor had to be put on its size. The provisions in the LGFL that specify
that the grant cannot be less than 1% of the GDP, nor less than the previous year’s actual allocation,
reflect this conviction and represent a major landmark in improving both the adequacy and stability
of Albania’s intergovernmental finance system.
The role of Conditional Grants in the intergovernmental finance system has increased fairly
steadily since 2007. Indeed, by 2010, the amount of Conditional Grants in the system had more
than doubled and as can be seen from Figure 4 below, rose to 25% of total local income before
peaking in 2015 at 29%. This rise crowded-out efforts to increase the size of the Unconditional
Grant and occurred across the tenures of national governments run by opposing political parties.
This suggests that both parties found Conditional Grants to be useful tools to control infrastructure
development at the local level and exert political control over local governments.
Figure 4: Composition of Basic Local Government Revenues as % of Total 2002-2016
24%
57% 56% 55%47% 44% 47% 43% 41% 42% 43% 39% 39% 38% 37%
67%
37% 34% 38%37%
34%37% 38%
33% 34% 34% 36% 35% 33% 38%
9% 7% 10% 7%16% 22% 17% 18% 26% 24% 23% 25% 25% 29% 25%
0%
20%
40%
60%
80%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Own Source Revenues Unconditional Grant Conditional Grants (w/o MSWY)
11
Figure 5 below compares the composition of local government revenues in Albania with those of
other South-East European countries in 2015. Countries are ranked from left to right based on the
share of local revenue in total public revenue. Not surprisingly, countries in which local
governments are responsible for significant social sector functions (e.g. primary education) are
clustered on the left hand side of the figure. Their own-revenues from local taxes and fees also
represent a lower share of their total revenue. Meanwhile, in countries in which local governments
perform few or no social sector functions, their own-revenues represent higher shares of their total
revenue. This is a function of the fact that it is very difficult to assign local governments own-
revenues robust enough to cover the costs of social sector functions. Blochlinger and King have
dubbed this phenomena the “decentralization paradox”, the paradox being that the more service
responsibilities that are assigned to local governments, the less local governments can be expected
to finance these functions themselves8.
Figure 5: The Composition of Local Government Revenues in South-East Europe in 2015
NALAS, Fiscal Decentralization Indicators in South-East Europe, 2012-2016 http://www.nalas.eu/News/FD_Rep_17
Albania’s position in the figure is noteworthy for four reasons. First, in 2015, and as we have
already seen, Albanian local governments received a lower share of total public revenue than any
of their counterparts in the region. Second, they had the highest share of income from Conditional
(investment) Grants. Indeed, the only countries remotely close to Albania are all new members of
the European Union -Bulgaria, Slovenia, and Romania- who receive large amounts of structural
support from the EU through Conditional Grants to local governments. Third, the Albanian
8 Blochliger and King, “Less than You Thought: the Fiscal Autonomy of Sub-Central Governments” OECD Economic Studies
No.43 pp. 156-185 http://www.oecd.org/eco/publicfinanceandfiscalpolicy/40507581.pdf. The only way to escape this paradox is
to give local governments not just PIT shares, but control over PIT rates. This is the foundation of both Nordic and Swiss Fiscal
Federalism in which the national government determines the base of PIT and collects it, but allows local governments set the
rates.
27%19%
12%21%
33%43%
35% 33%
70%
28%41% 42% 46%
35%
24%
0% 21%
46%6%
22%10%
18%
48%
41%50%
19%
5%
6%
33%
30%
6% 5%
20% 52%
12%
3%
14%8%
31%
35%
35% 45%
66%52% 38%
17%
7% 2% 1% 3% 3%13% 7% 6% 1%
22%4% 4%
25%
0%
20%
40%
60%
80%
100%
RO RKS MD HR MK BG SEE RS (BiH) MNE SLO RS TR FBiH(BiH)
AL
Own Revenues Shared Taxes General Grant
Sectoral Block Grants Investment Grants LG revenues, % of public rev.
12 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
intergovernmental finance system makes comparatively modest use of shared taxes, and unlike
Romania, Moldova, Croatia, Republika Srpska, Montenegro, Slovenia, Serbia, Turkey and the
Federation of Bosnia Herzegovina, was not sharing Personal Income Tax with its local
governments. And finally, sectorial block grants are absent from the system because in 2015
Albania had yet to devolve any of the social sector functions that these grants are typically used to
fund.
PIT sharing has become an important pillar of local government finance throughout post-
communist Europe. One reason for this is that it provides a direct budgetary incentive for local
governments both to encourage job creation and to work with their national governments to
formalize the grey economy. Another, is because PIT per capita is a good objective measure of the
relative wealth of different jurisdictions and can thus be used to anchor transparent, fair, and easy
to administer equalization systems9.
Indeed, for all these reasons Albanian local government legislation had anticipated the introduction
of PIT sharing since the first Organic Law was passed in 200010. Nonetheless, it wasn’t until the
2017 passage of the LGFL that PIT sharing was introduced in practice. As result, in 2017, Albania
municipalities will begin to receive a modest 2% share of the PIT generated on their territories.
This will not be enough to provide municipalities with either a strong budgetary incentive to create
jobs or to work with the national government to formalize the grey economy; but it will increase
their overall revenues and help strengthen the equalization system within the Unconditional Grant
formula.11
In this context, it is also worth noting that the LGFL introduces a new category of Specific
Transfers to finance the functions devolved to local governments under the 2015 Law on Local
Self-Government. The most costly and important of these functions is the payment of the wages
of preschool teachers. As already indicated, in 2016 the national government added 6 billion ALL
into the intergovernmental finance system to finance the costs of these functions. But with the
passage of the LGFL, these functions will be financed by Specific Transfers that will function like
the sectorial block grants that other countries in the region use to finance social sector functions.
9 See USAID/PLGP White Paper on Fiscal Decentralization in Albania (http://www.plgp.al/index.php/en/resources/plgp-
publications/99-white-paper) and Tony Levitas, EURASIA State of Decentralization Background Paper, Seminar for Dialogue and
Capacity building of local and regional authorities in Eurasia in the development and local governance fields, SKL International
Tbilisi, Georgia May 2013 pp. 1-30.
10 Article 17 of Law 8652 on the Organization and Functioning of Local Governments, 31/07/2000
11 It is perhaps worth adding that neither the Law on Local Self Government nor the LGFL specifies that PIT must be shared on
an origin basis. The equalization provisions of the LGFL, however, can only be implemented if all shared taxes are shared on an
origin basis. Also, all taxes shared that have been shared with local governments in the past (e.g. the Vehicle Registration Tax
and the SBT) have been shared on an origin-basis.
13
Figure 6: Composition of Local Government Revenues in Albania in 2016 Compared to SEE Average in 2015
Data for SEE from NALAS cited above
Figure 6 above, compares the composition of local government revenues in Albania in 2015 and
2016 –including the new Specific Transfers– with the average composition of local government
revenues for the countries of South East Europe in 2015. As can be seen from the Figure, even
though the share of (conditional) investment grants remains inordinately high, the structure of
municipal finances in Albania has moved closer to the regional average, and will move further in
this direction with introduction of PIT sharing in 2017.
Figure 7 below, shows the composition of local government own-revenue between 2002 and 2016
in billion ALL. As can be seen from the figure, local government own-revenue increased
substantially in 2016, suggesting that the new consolidated municipalities are more effectively
collecting own revenues than their predecessors.
Figure 7: The Composition of Own-Revenue 2002-2016 (BN ALL)
Note: In the figure the Vehicle Tax is included as an own revenue. With the LGFL it will be classified as a shared tax and its sharing
rate will be increased from 18% to 25%.
0.8 0.7 1.12.5 2.8 3.2
1.5 1.6 1.6 2.0 1.8 3.1 3.3 4.01.3 1.3 1.3 1.7 1.72.0 2.1
3.3
0.82.6 2.3
2.6
3.3 3.8 4.22.9 2.2 1.9
2.2 2.2
2.3 2.3
3.0
1.6 1.5 1.8
2.22.5
2.83.2
2.7 3.2 1.6 1.8
2.4 1.4
2.8
0.4 0.5
0.50.6
0.60.7
1.3 1.3 1.4 1.5
1.11.1
1.0
3.0 4.13.6
2.42.2
3.02.6 2.4 2.6 2.3 2.1
1.7 2.1
0.6
1.2
0.50.5 2.2
1.41.7
1.82.2 2.8 2.0 2.2 2.1
2.2 1.9
3.2
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Property Tax Fees for Local Services Administrative Fees Infrastructure Impact Tax
Vehicle Taxes Small Business Tax Other
14 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
In 2008, as part of the effort to reduce the tax burden on businesses, the national government
halved the rates local governments could impose on the property of legal entities. As a result, the
yield of the tax plummeted. In 2014, these constraints were removed and the collection of the tax
returned to its 2008 levels. Indeed, studies of individual jurisdictions suggest that over 80% of the
yield of the tax is derived from businesses. Nonetheless, and as can be seen from Figure 8 below,
the tax now constitutes 22% of local government own-revenue and is the largest single source of
revenue that municipalities collect themselves. Meanwhile, the yield of the SBT has collapsed,
and in 2016 the tax generated only 3% of local government own-revenue.
Figure 8: The Composition of Local Government Own-Revenue as a Percentage of Own-Revenue
The collection of both Fees and Administrative charges have also increased significantly,
suggesting that local governments are doing a better job recovering the costs for the services they
provide. Between 2011 and 2015 the yield of the Infrastructure Impact Tax fell significantly in
both real terms and as a percentage of local own-revenue. In part, this is because the investment
boom of the mid-2000s slowed significantly with the global recession of 2009-10. And in part, it
is because the national government imposed a moratorium on new construction until local
governments completed their Territorial Development Plans. In 2016, revenue from this tax
increased but it is unclear how much this may be due to public works built by the national
government, and how much it is related to new private construction.
Figures 9 & 10 below, show the yield of the property tax as percentage of GDP and of total local
government revenue in all countries of South-East Europe in 2006 and 2015. As can be seen from
the figures, there has been a growth in the yield of the tax in most countries of the region.
Nonetheless, the property tax still yields revenue equal to less than 0.6% of GDP in all countries
of the region except for Montenegro, Romania and Serbia, with the greatest changes in the period
28%
8% 11%20% 21% 20%
10% 11% 11% 15% 14%21% 23% 22%
9% 9% 9%13% 13%
14% 15% 18%
29%
29% 23%
26%
27% 28% 27%21% 15% 13%
16% 17%
16%16% 17%18%
15%18%
18% 19% 18%22%
19% 23%12% 14%
16% 10%15%
5%5%
4% 4% 4% 5%9%
9% 11% 11%
7% 8%6%34%
40%
35%
20% 16% 20% 18%17%
19% 17% 16%11% 15% 3%43%
5% 5%
21%11% 12% 11% 15% 20% 14% 16% 16% 15% 13% 18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Property Tax Fees for Local Services Administrative Fees Infrastructure Impact Tax
Vehicle Taxes Small Business Tax Other
15
occurring in the latter two countries. Indeed, the collection of the property tax in Serbia and
Montenegro are now both in line with the average for the EU (c. 1.1% of GDP in 2014) -which in
turn is low by American or Canadian standards (2.5% - 3% of GDP).
Figures 9 & 10: The Property Tax as % of GDP and Local Government Own Revenues in SEE 2006 and 2015
In Montenegro, much of the yield of the tax comes from coastal properties in general, and hotels
in particular. Here, municipalities have turned heavily to the tax as the national government has
rolled back their powers to impose taxes on new construction and on business registration.
The story in Serbia is more complicated. Until 2006, the national government administered the tax
but transferred 100% of its yield to local governments. But because the national government
derived no revenue from the tax, the registration of the base, its valuation and collection were
extremely poor. As a result, local governments inherited extremely poor administrative data on the
tax when it was handed over to them in 2007. The construction of local fiscal cadasters has been a
long and slow process. The national government has helped by developing tax registration and
billing soft-ware and donors have supported municipal efforts to improve the registration and
valuation of properties. As in Montenegro, the national government has also forced local
governments to use the tax by limiting their ability to tax the business community. And most
recently, it has put in place an incentive system that rewards local governments for increasing
collection. Taken together, these measures have managed to double the yield of the tax over the
last decade.
For their part, both Kosovo and Republika Srpska have tried to improve the yield of the tax by
creating centralized fiscal cadasters. With the support of the international community, the
government of Kosovo created a Property Tax Agency within the Ministry of Finance. This
Agency is responsible for maintaining a national fiscal cadaster of all properties. It also prepares
tax bills for all properties after local governments submit to it information on valuation and rates.
BG
HR
RKS
MK
MD
MNE
RO
RS
SLO
TRAL
FBiH (BiH)
RS (BiH)
BiH
SEE
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
0% 5% 10% 15% 20% 25%
% o
f G
DP
% of total local revenues
2015
RSHR
RKS
MK
MDMNE
RO
BG
SLO
TR AL
FBiH (BiH)
RS ([BiH)BiH SEE
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
0% 5% 10% 15% 20% 25%
% o
f G
DP
% of total local revenues
2006
16 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
By the mid-2000s, and with the help of significant donor funding, the Agency had registered most
buildings in the country. But local governments did a poor job of registering new properties and
by 2012 the cadaster had to be updated through another –largely donor funded– round of mass
registration. Local governments have also kept valuation and rates low, and have been lax with
respect to collection. As a result, the yield of the tax has not increased dramatically and collection
rates remain at about 50% after payments for outstanding debt are accounted for12.
Republika Srpska has also moved to a more centralized system. In 2012, the entity government
put in place a national cadaster system and recentralized the administration of the tax. As a result,
the entity government now values all properties, sends out tax bills, and collects the tax.
Municipalities however, are still responsible for setting tax rates and for ensuring the registry of
new properties. So far however, the new system has yet to yield substantial improvements.
These different strategies to improve the performance of the property tax should be carefully
examined by Albanian policy makers, particularly since the LGFL clearly designates the property
tax as the most important source of local tax revenue. Indeed, the development of the tax is
critically important for the development of responsive and accountable local governments in
Albania because it will be the single most important fiscal instrument linking citizens –as taxpayers
and consumers of local public services—to their democratically elected officials.
For this linkage to work however, the tax has to be fairly imposed on both commercial and
residential properties and uniformly enforced and collected, neither of which has proved easy
anywhere. In part this is because the infrastructure necessary to administer the tax is technically
complicated and costly to develop. But it is also because local government officials are reluctant
to tax their electorates and prefer to raise revenue through less transparent means.
Kosovo and Republika Srpska have tried to address the technical problems of administering the
tax by creating a centralized property registry that can calculate and issue all tax bills once
valuation and registration information has been in-putted locally. And in Republika Srpska,
collection has also been recentralized, meaning that all the tax execution powers of the national
government can in theory be brought to bear on reluctant tax payers.
Neither Kosovo nor Republika Srpska, however, have yet to see big returns on their investment
into the tax whose yield remains low. In large measure this is because the recentralization of tax
administration does not fix the second problem that the property tax almost inevitably encounters
in practice: The reluctance of democratically elected local officials to actually use the tax to raise
revenue from voters. Indeed, the experience of Kosovo and Republika Srpska –like those of many
other governments—demonstrate that even the most technically sophisticated administrative
systems will leak like sieves if local officials fail to register (new) properties, value them in
12 B. Disha, S. Kurtisi, T. Levitas, “Improving Municipal Own Source Revenue in Kosovo” (USAID/Democratic Effective
Municipalities Initiative, January 2012) pp. 1-25.
17
uniform ways, and enforce collection –assuming that they actually have some real enforcement
powers.
As such, Albanian policy-makers should be wary of technological solutions to the property tax
problem that do not address the reluctance of local officials to impose the tax as well as the
reluctance of citizens to pay. In this context, the short description provided above of Serbia’s (not
so short history) with the tax may be instructive. Here, the recent substantial gains in the yield of
the tax have come not through the recentralization of tax administration, but through a combination
of national support for the development of reasonably uniform local cadasters; national pressure
on all local governments to use the tax; and financial and other rewards for those local governments
that actually improve registration and collection.
In short, while it may make sense for Albania –as a relatively small country—to centralize certain
aspects of property tax registration and valuation –while maintaining the essentially local character
of the tax (rate setting, billing and collection) - policy makers should not forget that much of the
real challenge lies beyond the realm of purely technical solutions. Moreover, as important as the
development of a uniform and equitable property tax system is for Albanian local democracy,
national policy makers should recognize that even in the best instance the tax will yield insufficient
revenue for local governments to pay for significant social sector functions on their own.
At best, a well-executed property tax reform will increase –hopefully significantly— the ability of
local governments to meet their electorates demand for better local infrastructure and services.
This is critically important. But it is important more because of its power to change the relationship
between citizens and their local officials than it is as a way to relieve fiscal pressure on the national
government by raising the amount of money local governments can raise themselves. Or put
another way, while there is every reason in the world to implement a fair, equitable and effective
property tax system in Albania, the primary objective this effort should be to improve the nature
of local governance, and not to reduce the amount of central transfers.
18 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
4. LOCAL GOVERNMENT EXPENDITURE
This section provides a description of local government expenditures, their status and development
over the past six years, following the economic and functional classification, and divided by the
source of funding. This section shows also where local government investment spending is focused
and where the central governments’ transfers at the local level are focused.
Figures 10 and 11 below, show the composition of local government expenditures according to
their economic classification in both billion ALL and as a share of total expenditure for the years
2011-2016. As can be seen from the figures, local government personnel spending increased
sharply (c. 30% or 5 billion ALL) in 2016 after remaining stable for many years. This reflects the
fiscal weight of the functions devolved to local government by the new Law on Local Self-
Government, and in particular the costs of paying pre-school teachers.
It is also striking that since 2011, local governments have spent between 34% and 42% of their
total budgets on investment, and in 2016 investments amounted to just under 20 billion ALL (c.
156 million USD). The high share of investment spending in local government budgets is
impressive and suggests that local governments are making concerted efforts to improve the lives
of their citizens.
Figures 11 & 12: Total Local Government Expenditure, in BN ALL and as a Percentage of Total, 2011-2016
But here two things must be remembered. First, half of all investment spending has been financed
through the Conditional Grants (mostly from the Regional Development Fund), which we
discussed earlier. The allocation of these grants has been highly politicized and in many cases
10.4 10.1 10.8 11.0 11.0 16.2
9.8 11.0 10.4 11.1 12.1 12.6
13.6 10.8 13.0 15.5 16.5
19.9 33.7 32.0 34.3 37.5 39.6
48.8
-
10.0
20.0
30.0
40.0
50.0
2011 2012 2013 2014 2015 2016
Personnel Operational
Capital Investments Total
31% 32% 32% 29% 28% 33%
29% 34% 30% 30% 31% 26%
40% 34% 38% 41% 42% 41%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Personnel Operational Capital Investments
19
reflects more the priorities of the national government than it does those of local governments.13
Second, much of this investment is concentrated in a few jurisdictions, with between 25 and 30%
of it going to Tirana and Durres, the two largest cities in the country.
Figures 13 and 14 below, show the composition of freely disposable municipal expenditure
(without Conditional Grants) according to their economic classification in both billions of ALL
and as shares of total expenditures. Without conditional grants, investment spending drops from
about 40% of total spending (Figure 12) to about 25% (Figures 14). Moreover, almost half of
investment spending from freely disposable revenues comes from Tirana and Durres.
Figures 13 & 14: Local Government Expenditure from Freely Disposable Revenues, in BN ALL and as a Percentage of Total 2011-2016
The wages for preschool teachers in 2016 appear in both figures as freely disposable revenues because this is how
they are registered in the treasury system.
Figures 15 and 16 below show the composition of investment spending by functional classification
from both freely disposable revenue, and from Conditional Grants for the years 2011-2016. As can
be seen from the figures, more than 60% of all investment spending from both sources has gone
towards public transport, meaning essentially roads and the renovation of public squares. There is
no question that Albania needs to improve its road network and public squares. But it should also
be noted that spending on road improvement and public squares is also the easiest type of
investment spending to execute because it requires the least amount of complex planning and
because road investments can be suspended mid-stream without great cost, if money runs out. As
such it is likely that the high share of investment spending on roads and public squares is not just
a reflection of needs or preferences, but also a reflection of the difficulties of preparing investment
projects in other areas.
13 See for example UNDP “Assessment of design and performance, recommendations for improvements and support in reforming
the Regional Development Fund” December 2010, pp 1-34 and “ Albanian Association of Municipalities, “Position paper on the
Allocation of the RDF” March 11, 2014, pp 1-2
9.6 9.5 10.0 10.3 10.2 15.6
8.6 10.0 9.4 10.2 10.0
10.8 7.1 5.0 6.2 7.1 8.0
10.2 25.3 24.6 25.6 27.5 28.3
36.6
-
10.0
20.0
30.0
40.0
2011 2012 2013 2014 2015 2016
Freely Disposable Local Expenditures
Personnel Operational
Capital Investments Total
38.0% 38.8% 39.1% 37.5% 36.0% 42.6%
33.9% 40.7% 36.8% 36.8% 35.5% 29.6%
28.1% 20.5% 24.1% 25.6% 28.5% 27.7%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Own Local Expenditures
Personnel Operational Capital Investments
20 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
As can be seen from the figures, most investment in education has come from conditional grants,
while almost all investment in local administrative capacity has come from own-source revenue.
Investments in the improvement of local public services have been financed almost in equal part
by local and conditional funds.
Figures 15 & 16: Composition of Local Government Investment Spending from Freely Disposable and Grant Funding by Functional Classification, 2011-2016 (BN ALL)
Figures 17 and 18 below show the composition of total local government spending by functional
classification for the years 2011-2016 in billions of ALL and as a percentage of total spending. As
can be seen from Figure 17, between 2011 and 2015 spending on Administrative Services
amounted to about 11 billion ALL before declining to 10 billion ALL in 2016. Meanwhile,
spending on other functions increased sharply, so much so that spending on Administrative
Services declined from about 30% of total spending in the years prior to 2015, to 20% in 2016.
Although it is too early to make any conclusive judgements, this suggests that territorial
consolidation has increased the administrative efficiency of local governments in Albania, and
that the 61 new municipalities, on average, have managed to reduce administrative costs both in
absolute terms and relative to the other services they provide.
4.2 2.4
3.5 3.7 5.2 6.0
1.4
1.3
1.4 1.7
1.6
2.2 1.2
1.0
0.9 1.1
0.7
1.0
0.2
0.2
0.2 0.4
0.4
0.8
- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
10.0 11.0
2011 2012 2013 2014 2015 2016
Freely Disposable Local Investments
Other Culture
Education Administrative Services
Local Public Services Public Transport Infrastructure
1.8 1.7 3.1
4.2 4.7 6.6
2.0 1.5
2.1 1.4
1.9
1.5
2.1 2.3
1.6
2.6 1.8
1.6
- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
10.0 11.0
2011 2012 2013 2014 2015 2016
Conditional Local Investments
Other Culture
Education Administrative Services
Local Public Services Public Transport Infrastructure
21
Figures 17 & 18: Composition of Local Government Spending by Functional Classification, 2011-2016 in BN ALL and as a Share of Total
These conclusions, however should be regarded cautiously for two reasons. First, it is possible that
some of the reduction in spending on administrative services has come at the expense of the rural
areas that have been incorporated within municipalities. And second, it is quite possible that
administrative costs will increase in both absolute terms and as a share of total spending as local
governments improve the services they provide.
The importance of conditional investment grants for spending on public transport and public
squares can be seen in the rapid expansion of this category of expenditure in both charts. Indeed,
it masks the growth in absolute spending that has occurred over the last few years in other areas
like Local Public Services. Also noteworthy is the increase in education spending in both absolute
terms and as a share of total spending. In part, this increase comes from Conditional Grants for
education infrastructure. But the lion’s share of the increase in 2016 comes from the devolution of
preschool education to local governments. Finally, it should be noted that spending on Water
Supply and on Housing –both contained in the other category— remain low.
11 11 11 11 11 10
7 5 7 9 11 155 5
66
77
3 33
4 3
7
2 2 22 2
2
1 1 11 2
2
1 1 11 1
2
4 44
33
4
0
10
20
30
40
50
2011 2012 2013 2014 2015 2016Administrative Services Public Transport Infrastructure
Local Public Services Preschool and Primary Education
Sport, Culture, Religion Social Prodection
Secondary Education Other
33% 35% 32% 30% 28%20%
20% 16% 22% 24% 28%30%
14% 16% 16% 17% 17%15%
9% 10% 8% 11% 8% 15%6% 5% 5% 4% 4% 4%2% 3% 3% 3% 4% 4%3% 3% 3% 3% 3% 4%11% 11% 12% 9% 9% 7%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Other Secondary Education
Social Prodection Sport, Culture, Religion
Preschool and Primary Education Local Public Services
Public Transport Infrastructure Administrative Services
22 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
5. THE DISTRIBUTION OF LOCAL GOVERNMENT REVENUES
AND EXPENDITURES
The consolidation of local governments in 2015 was accompanied by the development of a new
formula for allocation of the Unconditional Grant in 2016. But this new formula was not fully
implemented in either 2016 or 2017 because MoF imposed “hold-harmless” provisions on the
allocation of the grant. These provisions required that no municipality receive less than 85% of
what they had received in previous years. They were considered necessary by MoF because
contrary to the Ministry’s expectations the GoA did not increase the size of the Unconditional
Grant in 2016 and without such an increase, the formula would have produced a politically
unacceptable number of jurisdictions that lost substantial amounts of funding.
As a result, the new formula —whose parameters are now defined but not fully specified in the
LGFL— is expected to go into effect in 2018. The increase in the Unconditional Grant that is
expected to come from anchoring it to 1% of the Gross Domestic Product should allow for enough
coverage and to ensure that there are no losers from the transition from one formula to another.
In the following, we repeat the same basic analysis of the equity of intergovernmental finance that
we conducted in 201214. As we shall see, the system continues to favor small but not necessarily
poor municipalities at the expense of more urban jurisdictions that appear to have weak tax bases.
Given the hold harmless provisions imposed on the formula this is not surprising since these
provisions essentially left the previous per capita allocation of the grant unchanged.
It should also be noted, that in the following, judgements about the relative wealth and poverty of
municipalities are being made on the basis of their per capita collection of revenues from local
taxes, fees, and charges. This is suggestive, but judgements about the relative wealth of
jurisdictions should not be made on the basis of collected revenues because these are heavily
dependent on the behavior of municipalities -on how willing local governments are to actually tax
their citizens. Instead, such judgements should be made on the basis of an objective measure of
the relative strength of local government tax bases.
Unfortunately, such “objective” measures are hard to come by. But in the future, the expansion of
tax sharing called for in the LGFL –and in particular, the analysis of the per capita yield of PIT by
location- should allow for a much more reliable assessment of the real wealth of municipalities,
14 Tony Levitas, Albanian Local Government Finance on the Eve of Territorial Consolidation, Planning and Governance Reform
Project (ARD-TetraTech/USAID) September 2014 pp. 1-40
23
and with it the equity of the intergovernmental finance system. Nonetheless, it is still useful to
look at the system using per capita collections as the metric of relative wealth.
Table 1 below, presents the per capita revenues of municipalities in quartiles organized by per
capita revenue from local taxes, fees, and charges. What this means is that we have ranked all
municipalities in order of their per capita own-revenues from “poorest” to “richest”. We have then
separated out the Capital City of Tirana as a special case and divided the remaining 60
municipalities into four groups –quartiles– each composed of 15 municipalities each. The first
quartile contains the 15 municipalities that collect the least own-source revenue, while the fourth
contains the 15 that collect the most. The third column in the top half of the table presents the
average population of the municipalities in each quartile. The last column shows the percentage of
total per capita revenues of each quartile in relation to those of the 4th quartile. And the columns
in between, the per capita yield of different types of municipal revenue.
Table 1: Per Capita Revenues of Municipalities by Quartiles Organized by Per Capita Own-Revenue in 2016
Pop. in Quartile
Average Pop.
Own Revenue
Shared Taxes
Uncond. Grant
Condit. Grants
Total Revenue
% of Total Revenue to
4th Quartile
1st 407,306 27,154 1,595 261 8,676 3,251 13,782 66%
2nd 459,703 30,647 3,027 270 7,282 4,806 15,385 74%
3rd 807,183 53,812 4,154 361 6,303 4,602 15,419 74%
4th 568,524 37,902 7,262 430 6,625 6,609 20,926 100%
Tirana 557,422 557,422 13,023 504 4,326 1,254 19,107 91%
All 2,800,138 45,904 5,993 374 6,481 4,180 17,028 81%
Pop. in Quartile
% of Pop.
% of Own
Revenue
% of Shared Taxes
% of Uncond.
Grant
% of Condit. Grants
% of Total
Revenue
Ratio of % of Pop. %
of Revenue
1st 407,306 15% 4% 10% 19% 11% 12% 0.81
2nd 459,703 16% 8% 12% 18% 19% 15% 0.90
3rd 807,183 29% 20% 28% 28% 32% 26% 0.91
4th 568,524 20% 25% 23% 21% 32% 25% 1.23
Tirana 557,422 20% 43% 27% 13% 6% 22% 1.12
All 2,800,138 100% 100% 100% 100% 100% 100% 1.00
In the bottom half of the table, these middle columns show the percentage of each type of revenue
going to a particular quartile. Thus, Tirana collects 43% of all own-revenue in the system but only
gets 13% of the Unconditional Grant despite serving 20% of the population. The last column shows
the ratio of the percentage of the population living in each quartile to the percentage of that
quartiles total revenues. For example, c. 20% of the population lives in the 4th quartile which
receives c. 25% the total revenue in the system. So the ratio of its share of the population to its
share of the total revenues in the system is 1.23 to 1.
24 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
As can be seen from the Table, municipalities in the 1st and 2nd quartiles receive larger
Unconditional Grants than all the others. This makes sense because it means that the allocation of
the Unconditional Grant is helping to equalize the (collected) revenues of “poorer” jurisdictions
with those of richer ones. But a number of other things about the Table are puzzling. So puzzling
in fact that they ultimately cast a shadow on this initial observation.
The first is that while the allocation of the Unconditional Grant seems to be flowing to poorer
jurisdictions, the same cannot be said of Conditional Grants. Municipalities in the 1st Quartile
receive less in Conditional Grants than the 2nd Quartile. Indeed, and as can be seen from the bottom
half of the table, 1st Quartile municipalities receive a lower share of the total pool of Conditional
Grants (11%) than their share of the population (15%). This is odd, because one might reasonably
expect that Conditional Grants would also flow disproportionately to poorer municipalities.
But this is clearly not the case. In fact, municipalities in the 4th quartile have the highest per capita
amount from Conditional Grants and receive 32% of all Conditional Grant money despite the fact
that serve only 20% of the population. Indeed, they receive more per capita funding from both the
Unconditional Grant and Conditional Grants than the 3rd quartile, despite the fact that they collect
substantially more in own revenues.
These indicators suggest that while the Unconditional Grant is having an equalizing effect on the
system, it is not very efficient because the poorer jurisdictions of the 3rd Quartile get less per capita
from the grant than their richer counterparts in the 4th. At the same time, the allocation of
Conditional Grants seems to be dis-equalizing because with the exception of Tirana, most of it is
going to jurisdictions with relatively high per capita own revenues. Indeed, it looks like Tirana is
bearing most of the costs of equalization because its shares of both Conditional and Unconditional
Grants are significantly lower than its share of the population. To some extent this is both necessary
and to be expected because Tirana’s own-revenues are off the charts. Nonetheless, when looked at
regionally, it is extremely unusual that the total per capita revenues of a capital city are less than
the average per capita revenues of richest 25% of other municipalities (see below).
What is driving these outcomes becomes a little clearer when we examine Table 2 below. In this
Table, the quartiles are determined not by per capita own-revenues, but by population. Thus, the
1st Quartile is composed of the 15 smallest municipalities, and the 4th the 15 largest. This radically
changes the composition of the quartiles when compared to Table 1, as can be seen from the
percentage of the total population living in each one.
What is striking about the Table is that the per capita own-revenues of the 1st, 2nd and 4th quartiles
are remarkable flat, and that the 3rd Quartile actually collects less per capita revenue than all the
others. What this means, is that there is no obvious relationship between the population of a
municipality and its collection of own revenues. Instead, there are clearly a fair number of small
jurisdictions that do well with the collection of own revenues, as well as a fair number of large
jurisdictions that do not. Moreover, there may be a group of medium sized (3rd quartile)
municipalities with populations of 20,000 to 40,000 people that have particularly weak tax bases.
25
The lack of a clear relationship between population and the apparent ability to raise own-revenue
is unusual because in most countries there is a strong correlation between low population, rurality,
and weak revenue raising ability.
TABLE 2: LOCAL GOVERNMENT REVENUES PER CAPITA BY QUARTILES BASED ON POPULATION 2016
Quartile
Pop. in Quartile
Average Pop.
Local Revenue
P/C
Shared Taxes P/C
Uncond. Grant P/C
Condit. Grants
P/C
Total Revenu
e PC
Ratio of Revenue PC to 4th quartile
1st 121,480 8,099 4,757 232 12,735 11,454 29,178 2.08
2nd 312,190 20,813 4,829 495 8,325 6,316 19,965 1.42
3rd 464,382 30,959 3,639 304 7,449 6,654 18,046 1.29
4th 1,344,664 89,644 4,274 329 6,046 3,385 14,034 1.00
Tirana 557,422 557,422 13,023 504 4,326 1,254 19,107 1.36
All 2,800,138 45,904 5,993 374 6,481 4,180 17,028 1.21
Quartile
Population in
Quartile
% of Pop.
% of Local
Revenue
% of Shared Taxes
% of Uncond.
Grant
% of Condit. Grants
% of Total
Revenue
Ratio of % of Pop. to
% of Revenue
1st 121,480 4% 3% 3% 9% 12% 7% 1.7
2nd 312,190 11% 9% 15% 14% 17% 13% 1.2
3rd 464,382 17% 10% 14% 19% 26% 18% 1.1
4th 1,344,664 48% 34% 42% 45% 39% 40% 0.8
Tirana 557,422 20% 43% 27% 13% 6% 22% 1.1
All 2,800,138 100% 100% 100% 100% 100% 100% 1.0
The three quartiles of the smallest municipalities get higher per capita revenues from both
Unconditional and Conditional Grants than the 4th quartile, despite the fact that per capita local
revenues of the 4th Quartile are lower than those of the first two. The low population quartiles also
get substantially larger shares of these grants than their shares in the total population, whereas the
opposite is true for both the 4th quartile and Tirana. Or put another way, the first three quartiles of
municipalities –in which 32% of the population live—receive 42% of the Unconditional Grant,
and 55% of Conditional Grants. Meanwhile, the 48% of the population that lives in the 4th quartile,
and the 20% of the population that lives in Tirana receive –respectively– 45% and 13% of the
Unconditional Grant, and 39% and 6% of Conditional Grants.
In short, the allocation of both Unconditional and Conditional Grants in Albania strongly favors
municipalities with small populations –whether they are poor or not– over larger ones. To one
degree or another, this is justifiable to the degree that municipalities with low populations are also
sparsely populated. This is because the unit costs of servicing low density jurisdictions are usually
26 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
significantly higher than those servicing of at least moderately densely populated ones, though it
is also extremely difficult to measure exactly by how much15.
Nonetheless, Albania’s intergovernmental transfer system is very unusual with respect to how
strongly it seems to favor low population jurisdictions. For example, in Serbia the four largest
cities had per capita revenues seven times those of the 1st quartile of local governments in 2002.
Moreover, even after very significant improvements were made in the equalization system in 2006,
the gap between the richest and poorest quartiles of local governments remained well over 3 to 1,
a gap which widened again at the end of the decade16. Similarly, in 2010, Skopje –the capital of
Macedonia, had per capita revenues close to three times the average of all other jurisdictions,
while the per capita revenues of local governments in the 4th quartile were five times higher than
those of the 1st17. Finally, in Georgia, the capital city of Tbilisi receives close to 50% of all the
revenues in the intergovernmental finance system –including 50% of the “Equalization Grant”-
despite the fact that only 30% of the population lives in the capital.18
The point here, however, is not that Albania should try to emulate what is going on elsewhere. Far
from it. Indeed, in many ways Albania should be complimented for its commitment to equalization.
At the same time, the strong preferences for small jurisdictions –independent of their apparent
revenue raising ability- that can be seen in the allocation of both the Unconditional Grant and
Conditional Grants should be reviewed.
Table 3 below, shows the composition of own-revenues across quartiles ranked according to total
per capita own-revenues19. As would expected, per capita revenues of all types –with the exception
of fees from the use of public space in the 2nd Quartile—increase steadily from the 1st Quartile
15 On both the general tendency of low density jurisdictions to have high unit service costs, and the difficulties of
measuring these differences see J. Kim and J. Lotz (eds), Measuring Local Government Needs, The Korea Institute
of Public Finance and the Danish Ministry of Social Welfare, Copenhagen 2008. We use the phrase “moderately
densely populated” because it is often argued that there is a “U-shaped” distribution of unit costs across
municipalities with different densities, with costs highest in both the least and most densely populated jurisdictions
(See “Introduction,” in Kim and Lotz. Pp 1-12).
16 See Tony Levitas, Reforming Serbia’s Intergovernmental Finance System, Serbia Local Government, in Journal of
Public Administration (Volume 28, Spring 2005) pp. 149-178 and Levitas, The Effects of the Suspension of the Law
on Local Government Finance on the Revenue and Expenditure Behavior of Local Governments in Serbia: 2007-
2009, Serbian Quarterly Economic Monitor, Winter 2010) p. 1-28
17 See Tony Levitas, Local Government Finances in Macedonia Today: Possible Reforms for Tomorrow, IDG
Working Paper, Urban Institute, May 2010, pp 1-39
18 Towards Improving the Efficiency and Equity of Georgia’s Intergovernmental Finance System, USAID/TetraT?ech,
July 2016, pp 1-45. In Georgia, the strong preference for Tbilisi is combined with a strong preference for tiny
settlements in mountainous areas. Taken together this is starving the mid-sized cities and towns in which most of the
population lives, giving Georgia the worst of both worlds.
19 The Table is slightly different from Table 1 because in Table 1 shared Vehicle Tax was included in the pool of
revenues used to create the quartiles.
27
through the 4th and Tirana. Indeed the per capita own revenues of the 4th quartile are more than
four times more than the first. The average population of municipalities in the 3rd and 4th quartiles
are also higher than those in the 1st and 2nd. But again the correlation between population size and
revenue raising ability is far from perfect, because the larger jurisdictions of the 3rd quartile
(average population 54,000) collect significantly less own revenue than their smaller counter parts
in the 4th (average population 38,000). So again, some small jurisdictions are probably getting more
than their fair share of grants, and some larger (and hard-pressed) municipalities are getting less.
Table 3: The Composition of Per Capita Own-Revenues in 2016 by Quartiles based on Per Capita Own Revenues
Pop Property
Taxes
Other Local Taxes
Fees for Local
Services
Fees for the use of
public space
Admin. Charges
Total Own Revenue
1st 396,272 326 417 296 34 418 1,491
2nd 470,737 799 804 656 158 530 2,948
3rd 807,183 1,134 1,199 767 96 906 4,102
4th 568,524 1,778 2,662 1,078 237 1,400 7,157
Tirana 557,422 2,737 5,338 2,861 539 1,511 12,987
All 2,800,138 1,413 2,143 1,162 215 995 5,927
Table 4 below, presents the per capita expenditures of local governments without Conditional
Grants broken down by economic classification and organized in quartiles based on total per capita
expenditures without Conditional Grants. As can be seen from the Table, 55% of the population
lives in the first two quartiles with lowest per capita expenditures from freely disposable revenues
while only 7% of the population lives in the 4th quartile, where such expenditures are close to the
levels achieved by Tirana. The high investment spending of this quartile of small municipalities is
a result of the fact that these municipalities both collect higher than average amounts of own-
revenues while also receiving generous Unconditional Grants. The low investment spending of the
first two quartiles expresses the fact that many fairly large municipalities collect lower than
average amounts of own-revenue while also receiving modest Unconditional Grant awards.
Table 4: The Composition of Per Capita Local Government Expenditure by Quartiles based on Per Capita Expenditure without Conditional Grants in 2016
Pop. % of Pop.
Wages Goods
and Services
Other Operating
Expenditure Investment
Total Expenditure
Investment as % of Total
1st 812,777 29% 4,242 2,264 557 1,826 8,891 21%
2nd 741,150 26% 5,304 3,023 823 2,345 11,495 20%
3rd 492,524 18% 6,296 3,556 1,023 2,925 13,801 21%
4th 196,265 7% 8,920 4,397 1,072 5,367 19,755 27%
Tirana 557,422 20% 6,054 5,908 1,570 7,962 21,494 37%
All 2,800,138 100% 5,573 3,567 947 3,626 13,714 26%
28 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Looking ahead, in 2018 the hold harmless provisions currently governing the allocation of the
Unconditional Grant will be loosened or removed. At the same time, the other coefficients
governing the allocation of the formula –most importantly the coefficients for population and
relative wealth (based on the per capita yield of shared taxes) have to be set. In running the
simulations to determine these coefficients MoF should bear in mind the analysis above and adjust
the formula in ways that make the allocation of the funds more efficient and to the greatest possible
degree shift resources to larger municipalities with particularly weak tax bases. Similarly, the
objectives, rules, and the reporting of Conditional Grants –particularly those governing the
allocation of the Regional Development Fund—should be examined to determine whether funds
are being allocated in a way that serves the greatest good of the greatest number. We return to
these issues in the concluding section of the report.
29
6. THE LAW ON LOCAL GOVERNMENT FINANCE
AND ITS IMPACT ON MUNICIPAL BUDGETS
The passage of the Local Government Finance Law (LGFL) marks a milestone in Albania’s efforts
to create an adequate, equitable, and transparent intergovernmental finance system. The major
achievements of the law can be summarized as follows:
Anchoring the Unconditional Grant: The Law requires that the size of the Unconditional Grant
that local governments receive to support their expenditure responsibilities be set (anchored) at no
less than 1% of the GDP and no less than the previous year. As a result, and for the first time,
municipalities’ single largest revenue source will be predictable from year-to-year and will grow
with the economy. This should allow municipalities to reasonably forecast their budgets over a
multi-year time horizon and substantially improve their ability to plan and execute capital
improvements. It will also stabilize the intergovernmental finance system in ways that should
allow the Ministry of Finance to begin to ease the current restrictions on municipal borrowing.
New Principles for Allocating the Unconditional Grant: The consolidation of 373 local
governments into 61 larger municipalities required the definition of new principles for allocating
the Unconditional Grant. These new principles were necessary because the old ones were based
largely on the legal distinction between municipalities and communes, a distinction that territorial
consolidation made immaterial. But they were also designed to improve the transparency and
equity of the grant by:
• Shifting the foundation for the allocation from population as recorded in the Civil Registry,
towards population as registered in the 2011 census;
• Replacing the proxies for additional expenditure needs (mountainous/non-mountainous; a
non-transparent categorization of local governments in “fiscal distress”) with a single
proxy based on population density;
• Clearly grounding the revenue equalization component of the formula on shared taxes so
as not to discourage own-revenue collection.
In 2016 and 2017, these new principles were not fully used to allocate the Unconditional Grant
because without substantially increasing the size of the grant they would have led to significant
reductions in the grant awards of a number of municipalities that were treated preferentially under
the old formula. As a result, MoF imposed “hold harmless” provisions on the allocation of the
grant so the full effects of the new principles have not been realized.
With the passage of the LGFL not only have these principles been specified in the Law, but the
size of the Unconditional Grant pool has been increased by its anchoring to 1% of the GDP. As a
30 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
result, it will be possible to remove the hold harmless clauses that have been governing the
allocation of the grant since 2016. But before the new system can go into full effect, policy makers
will have to specify the population density and equalization coefficients that will be used for the
2018 allocations. These coefficients should be set in such a way as to increase the efficiency of the
grant by pushing money towards municipalities with weaker tax bases (as measured by the per
capita yield of shared taxes) while not penalizing those who increase their collection of own
revenues. It should also direct more funding to municipalities that have high population densities
but low revenue raising capacity –again as measured by the per capita yield of shared taxes.
Increased Role of Tax Sharing in the Intergovernmental Finance System: The Law increases
the role of tax sharing in the intergovernmental finance system by assigning to municipal budgets
2% of the yield of the Personal Income Tax (PIT) generated in their jurisdictions and expanding
the share of the Motor Vehicle Tax they receive from 18 to 25%. These new tax shares will increase
local revenues while also strengthening the equalization system by deepening the pool of funds
that can be equalized against without disincentivizing own-revenue collection. The potential future
increase of the PIT share would also create direct budgetary incentives for mayors to promote job
creation and align national and local interests with respect to formalizing the gray economy.
The Identification of the Property Tax as the Most Important Local Tax: The Law makes the
Property Tax the single most important local government own revenue. The Law regulates
municipalities’ ability to use Temporary Taxes to create ad hoc levies that in practice get
disproportionately imposed on businesses by requiring Temporary Taxes to be imposed as
surcharges on the Property Tax. It also specifies that fees for public services should be tied directly
to the full cost of providing those serves and to the greatest possible degree apportioned across
beneficiaries in accordance with their consumption the concerned services. These provisions
should increase the willingness of municipalities to invest in the modernization of property
taxation while also helping to align fees with service provision. Eventually, they should also help
shift the tax burden from firms to households. Hopefully, they will also strengthen the linkage
between local taxation and political accountability, while improving the business enabling
environment.
New Financial Management Principles: The Law introduces new principles for local financial
management. Among these are new standards for budget planning, execution, reporting, external
auditing, and provisions for identifying and resolving local fiscal distress. Taken together, these
new requirements should improve the sustainability and transparency of budget formation and
execution, reduce the arbitrary imposition of fees and taxes, help resolve situations in which
municipalities have accumulated unsustainable liabilities, prevent such situations from emerging
in the future, and reduce local fiscal mismanagement and malfeasance.
31
Devolution of New Functions to Municipalities: The new Law on Local Self-Government
eliminated the category of shared functions and devolved responsibilities in the areas of fire
protection, pre-school education, irrigation, and forestry to municipalities as own-functions. But
according to the LGFL these functions will be funded in part through Specific Transfers (and not
the Unconditional Grant) in order to ensure that municipalities who have the institutions necessary
to provide the services continue to receive adequate funding for them. This is an awkward
arrangement, but it should also increase the role of municipal governments in the provision of
basic public services. Figure 19 below shows the projected increase in transfers – without
Conditional Grants – that should result from the implementation of the LGFL over the next few
years. The projections are based on the assumption that funding for Specific Transfers, shared
taxes and the Unconditional Grant grow in line with the Government’s Macroeconomic and Fiscal
Framework20.
Figure 19: Projected Increase in Transfers Resulting from the LGFL
Figure 20 below presents a projection of total local government revenue over the next few years,
by integrating the Government’s projections for the Regional Development Fund (under the
Ministry of Urban Development) for 2018-2020, and by projecting a 10% annual increase in the
in the collection of own revenues. Taken together, these changes should generate a 13% increase
in total local government revenues by 2020 if the national government abides by its forecasts,
including those concerning Conditional Grants. This will mark a substantial improvement in the
financial position of local governments.
20 Decision of the Council of Ministers No. 47, dated 25.01.2017, “On the approval of the Macroeconomic and
Fiscal Framework for the period 2018-2020
14.0 12.9 11.2 11.6 11.6 12.2 13.3 12.5 13.0 13 13.8 14.5 16.0
2.53.3
3.8 3.5 1
11
6
7
77
7
19.0
22.2
24.8 26.2
27.4
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (P) 2019 (P) 2020 (P)
bili
on
ALL
Unconditional Grant without LGFL Single year support in 2017 Unconditional Grant PIT share Vehicle Tax Specific Transfers
32 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Figure 20: Projected Total Local Government Revenues Resulting from the LGFL
9.1 9.0 11.5 10.415.6 17.1 18.9 20.7 22.8
10.3 12.113.4 12.3
13.215.5
17.118.3
19.5
4.2 4.23.3 3.8
2.22.2
3.53.6
3.6
7.08.3
9.6 10.811.7
9.5 3.53.0
3.06.0 6.7 7.07.0
7.02.02.0
2.0
0
10
20
30
40
50
60
2012 2013 2014 2015 2016 2017 2018* 2019* 2020*Own Source Revenue Unconditional GrantShared Taxes Conditional Grants (+RDF)Specific Transfers for New Functions Conditional Transfers from Line Ministries
33
7. NEXT STEPS
Territorial Consolidation and the passage of both the new Law on Local Self-Government and the
Law on Local Self-Government Finance mark major milestones in Albania’s effort to create local
governments capable of effectively responding to the needs and preferences of their citizens. But
to fulfill their promises, these laws will have to be implemented smoothly and coherently. At the
same time, the GoA will have to decide on a national strategy to improve the use and effectiveness
of the property tax, and take steps to ensure the allocation of Conditional Grants is based less on
considerations of party politics and more on the objective needs of municipalities, however
defined. In the following, we outline some of the major challenges that remain to be faced.
Preparing, Negotiating and Allocating the Unconditional Grant: As we already indicated, in
2015, MoF developed a new formula to allocate the Unconditional Grant to the 61 consolidated
municipalities. The new formula’s main principles were later incorporated into the LGFL. But as
already discussed, in 2016 and 2017, MoF implemented the new formula using hold harmless
clauses.
This should not be repeated in 2018 particularly because it will be the last time in the foreseeable
future that the grant pool will expand significantly enough (2.5 to 3.5 billion ALL) to dampen the
effects of the reallocation of funds required by the new principles. Equally importantly, it needs to
be stressed that while these principles are stated clearly in the law, it is up to MoF and Parliament
– after consulting with the Consultative Council - to determine some of the coefficients and
brackets that will influence the final allocation of the grant, in particular the population density
component of the formula and its equalization provisions.
It is therefore important that work be initiated on the final structure of the formula as soon as
possible. In conducting this work both MoF and the representatives of local governments should
be guided by an understanding of the problems with the current allocation of the formula and the
objectives they want to achieve. In particular efforts should be made to redirect funds away from
small jurisdictions with robust tax bases and towards some of the larger municipalities that have
weak tax bases.
Ensuring that new tax shares are distributed on a True Origin Basis: The LGFL requires that
municipalities receive 2% of the PIT and 25% of the vehicle registration tax generated in their
jurisdictions. To date, however, MoF has never had to be concerned with the origin of PIT, only
that firms paid it on behalf of their employees. Allocating PIT on origin basis will thus require
going into the PIT database and extracting information about the place of residency of employees.
This is technically possible, but MoF needs to begin work in this area quickly if the tax is to be
allocated on an origin basis in 2018.
34 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Similarly, while the 18% share of the Vehicle Registration Tax has been allocated to local
governments on an origin basis in the past, the registration of the tax by the Road Directorate has
not been transparent. As a result, there has been uncertainty about whether local governments are
getting their “fair share” and constant tension between municipalities, MoF, and the Road
Directorate over the attribution of the tax to particular jurisdictions. To avoid these tensions in the
future, clear and transparent procedures for attributing the Vehicle Tax by origin should be
developed and implemented by MoF and the Road Directorate and discussed with local
governments.
Preparing new Financial Reporting and Budgeting Standards, and for Monitoring and
Resolving “Fiscal Distress”: The LGFL requires municipalities to improve their public finance
management practices in accordance with new guidelines, procedures and formats developed by
MoF (and the Central Audit Chamber). These include guidelines for projecting own-revenues;
formats for reporting all tax payers, tax liabilities and tax abatements; formats for reporting the
level of local fees and charges by type of fee payer; templates for both line ministries and
municipalities to report the allocation and use of Conditional Investment Grants; principles and
procedures for budget formulation, execution and reporting; and principles and procedures for the
external auditing of municipalities by accounting firms, principles and procedures that differ
substantially from the auditing of private sector entities. The development of these guidelines and
formats should be done in collaboration with the Consultative Council in order to ensure that their
implementation does in fact improve the finance and management practices of municipalities.
Further, the implementation of all these guidelines and bylaws from local government units is
critically dependent on the improvement of the human capacities at both the local and national
level.
Articles 56-59 of the Law also establish procedures for identifying local governments that are
having serious problems meeting their financial obligations and are at risk of becoming, or already
are, financially insolvent. These procedures require MoF to monitor municipalities’ unpaid
payment arrears, something that will require the Ministry to develop new detecting and reporting
formats. They also require municipalities whose arrears exceed certain thresholds to develop
financial work out plans, and for MoF to ensure that these plans are successfully implemented.
This is entirely new and contentious terrain. Moreover, according to senior MoF officials a number
of municipalities already exceed the first and second thresholds (arrears greater than 25% of their
annual expenditures) and five or six of them may already be in the third phase of “fiscal distress”
(arrears greater than 80% of their annual expenditures). If the provisions of the LGFL are to be
implemented, these municipalities, in cooperation with the MoF will have to develop and
implement recovery plans. Such plans are always problematic because they temporarily constrain
the financial independence of democratically-elected local governments. To ensure that they
generate as little conflict as possible they will have be both carefully prepared and clearly
35
explained to all stakeholders. To ensure that this is possible, work on these problems should begin
as fast as possible both within MoF and with the Consultative Council. Further, the system cannot
be entirely based on self-declaration and MoF should take steps to periodically monitor whether
local governments are really budgeting financial commitments in line with revenues.
Harmonizing Sectorial Legislation with the Devolution of New Functions to Municipalities
and the Rules Governing Specific Transfers: The new Law on Local Self-Government devolved
to municipalities significant new responsibilities in the areas preschool education, fire protection,
irrigation and forestry as own-functions. As own-functions, local governments should be free to
manage these functions as they see fit. They should also pay for them out of their general revenues.
But while this is the goal, it will take some time for this to become a reality.
There are two reasons for this. The first is prosaic: while the Law devolved these responsibilities
to municipalities as own functions, they continue to be regulated by sectorial laws and regulations
set by line ministries. Some regulation of these sectors will remain necessary to ensure that local
governments provide services in accordance with some set of minimum standards. Nonetheless
the existing legislation will have to be overhauled in order to give local governments some
reasonable amount of managerial autonomy. Finding the right balance between local autonomy
and centrally set but achievable service standards is a non-trivial task. At a minimum, it will require
intensive discussions between the line ministries responsible for regulating these sectors and the
municipalities who will now be delivering the concerned services.
The second reason is more complex and will complicate the task of determining reasonable
regulatory standards for the newly devolved functions. The origin of the problem lies in the fact
that the geographical distribution of the assets and employees that have been providing these
services on behalf of the national government is extremely uneven. For example, there are only 49
fire stations in the country, and not 61, meaning that while fire protection has been devolved to all
municipalities as an own function, not all municipalities have the assets and employees necessary
to provide the service. Similarly, the percentage of preschool-age children who have access to
preschools differs dramatically from one municipality to another because the national government
was never able to build and staff preschools everywhere they are necessary.
As a result, there is an inherent tension between devolving these functions to all municipalities as
own responsibilities, and the reality that only some of them have the infrastructure and staff to
actually provide the service now. Worse, this tension expresses itself in an extremely painful
financial dilemma: if all local governments are expected to provide newly devolved services
according to some reasonable minimum standards, then all local governments should be receiving
the resources necessary to do so. But giving all local governments these resources is incredibly
costly precisely because the services have never been adequately funded in the past -or at least not
everywhere in the country.
36 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
If, however, the national government simply allocates what it has spent on these functions in the
past to all local governments based on some reasonable metric like the number of citizens or pre-
school age children that these local governments must serve, then nobody is happy: local
governments that already have the assets and employees to provide the services get less money
than they got before and often have to close facilities. Meanwhile jurisdictions that don’t have the
infrastructure or employees, get some new money but typically not enough to actually provide the
service.
Unfortunately, there is no easy way out of this problem, a problem which in fact haunts
decentralization efforts in many countries across the globe. In Albania, the LGFL created the
category of Specific Transfers to give all parties to the problem additional time to work through it.
These Transfers allow the national government to provide those municipalities that already have
the infrastructure and employees to actually provide the concerned services with the same amount
of money that the national government spent on them in the past.
This is clearly unfair to other jurisdictions that should also receive funding for these new own
functions. But it prevents the reduction of services in places where they already exist. More
importantly for our purposes, the law limits the use of Specific Transfers for three years. As a
result, the national government has three years to develop and implement plans to overcome the
problems caused by devolving to (newly created) local governments public services that
historically have been provided (and funded) very unevenly across the country.
In some sectors these plans are already emerging. For example, the national government has
committed itself to building fire stations and purchasing fire trucks in at least some of the
municipalities that don’t have them. This is a good start, but the issue will require not only building
new infrastructure in many municipalities, but figuring out how local governments everywhere
should finance the operating costs of the services going forward. Meeting these challenges will
require a combination of sectorial, financial and legal expertise as well as the active and continuous
engagement of the Consultative Council and Albania’s Municipal Associations.
Strengthening Local Government Tax Powers: To improve the responsiveness, accountability
and efficiency of local governments it is critically important to strengthen the linkage between
municipalities and their electorates through local taxation. This will require the development of a
coherent political, legal and technological framework for the registration, valuation, billing,
collection and enforcement of the property tax, as well as rules that ensure that other local fees,
charges and taxes are fairly and uniformly imposed on different categories of tax payers.
With the encouragement of the IMF, the national government has recently begun considering the
development of a centralized fiscal cadaster designed to facilitate the registration and valuation of
37
all real property in the country. This may be a good idea, but the experiences of Kosovo and
Republika Srpska suggest that technologically sophisticated and centralized systems of property
registration and billing, do not in themselves ensure radical increases in the yield of the tax.
Meanwhile, the experiences of Serbia and Montenegro suggest that significant improvement in the
collection of the tax can be achieved without centralized cadaster systems if the national
government is prepared to consistently support municipalities in developing their capacity to
administer the tax, apply pressure on them to use the tax, and reward those who do.
It is beyond our purposes here to suggest the particular path that Albania should take to improve
the regulatory regime governing the property tax. But at least three points should be made here.
First, the construction of this regulatory regime needs to be developed with the active engagement
of local governments if they are going to actually use the tax. Second, both the national government
and municipalities must make it clear to taxpayers how and why they are being taxed, if voluntary
compliance is to improve. Or put another way, policy makers at both the national and local levels
must understand that while technical improvements in tax administration and collection are
extremely important, at the end of the day successful local taxation requires as much a change in
tax culture, as it does in tax administration. And finally, the experiences of other countries suggest
that while real gains in own-revenue mobilization can be achieved with the property tax reform,
these gains take years to mature and generally do not produce financial gains of sufficient
magnitude to allow for the reduction of national government transfers.
Reforming the Regional Development Fund: As we have indicated, the share of conditional
grants in the Albanian intergovernmental finance system has been inordinately high over the last
10 years and all ruling political coalitions have used the Fund as much for political purposes as for
developmental ones.
Over the coming years, the size of the Regional Development Fund will probably shrink as
indicated in the Governments’ Macroeconomic and Fiscal Projections for 2018-2020. Local
governments should consider this eventuality, and focus more of their energies on raising the
revenues they need to maintain high investment rates. At the same time however, the Regional
Development Fund will remain an important part of Albania’s intergovernmental finance system
and steps should be taken to ensure that its allocation is not only depoliticized, but focused on the
country’s most pressing needs.
For example, the Fund should clearly be used to equalize the resource and facility endowments
that are currently inhibiting all local governments from providing forestry, irrigation, fire
protection and pre-school services as own-functions in accordance with the 2015 Law on Local
Self Governance. This could be done by clearly stating that equalizing these endowments is a
priority of the fund, and that much of the fund will be used to build and equip fire stations and
38 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
preschools in those municipalities that don’t have them, or have too few of them relative to their
service (e.g. preschool age) populations.
Similarly, thought should be given to using the fund more to support critical efforts in the areas of
water supply, sewage treatment and solid waste disposal, as opposed to roads. Moreover, in
thinking through these issues, efforts should be made to ensure that the funds produce the greatest
good for the greatest number. This probably means directing funds to more densely populated
urban areas for network infrastructure at the cost of funding rural roads, and shifting the bias in
the existing allocation of the grants from small jurisdictions –regardless of the relative wealth—to
larger ones that have low revenue raising capacities as measured by the per capita yield of shared
taxes in their jurisdictions.
Improving local government access to debt financing: The LGFL, by stabilizing the foundations
of the intergovernmental finance system, should make municipalities more creditworthy. In light
of this, the GoA should consider loosening restrictions on local borrowing. Creditworthy
municipalities should be allowed to make effective use of their right to borrow while national
government conditional investment grants should be directed predominantly towards
municipalities with low revenue raising ability as measured by their per capita revenues from
shared taxes.
The careful liberalization of access to credit is also important because the inability of financially
sound local governments (e.g. Tirana) to finance major capital improvements through debt seems
to be encouraging them to enter into extremely non-transparent arrangements with private
developers to build public infrastructure. These non-transparent arrangements (read: badly
constructed PPPs) should be constrained, and where possible replaced with bank loans based on
simple, transparent and prudent debt regulations, most of which are already specified in the Law
on Local Government Borrowing of 200821.
At the same time, the GoA should also continue its efforts to reduce the borrowing of the national
government because at present Albania’s total public debt as a percentage of GDP (71%)
significantly exceeds the limits set by the European Union’s Maastricht Treaty (60%). As a result,
national government debt continues to crowd out local government borrowing.
21 Articles 17 and 18 of Law Nr. 9869, 04.02.2008, “On Local Government Borrowing.”
39
APPENDIX 1: COMPOSITION OF LOCAL GOVERNMENT BASIC REVENUES, IN ORDER OF THEIR PER CAPITA OWN REVENUES
Row Labels Pop. By Census
Local Revenues Per
Capita
Shared Taxes Per
Capita
Uncond. Grants Per
Capita
Condit, Grants
Per Capita
total revenue
per capita
Has 16790 716 288 11,252 10,440 22,696 Dibër 61619 1,065 190 8,156 1,183 10,594 Pustec 3290 1,174 118 10,196 333 11,821 Kurbin 46291 1,306 357 6,253 2,825 10,741 Bulqizë 31210 1,382 814 10,242 5,829 18,266 Këlcyrë 6113 1,553 151 12,866 12,398 26,968 Memaliaj 10657 1,590 150 11,831 4,066 17,637 Gramsh 24231 1,709 131 11,027 2,711 15,579 Klos 16618 1,712 141 8,705 2,703 13,261 Mat 27600 1,800 213 9,389 4,316 15,718 Peqin 26136 1,845 187 6,538 2,006 10,576 Kukës 47985 1,918 267 8,918 567 11,669 Prrenjas 24906 1,934 150 6,893 827 9,805 Maliq 41757 1,967 161 6,872 3,189 12,189 Mirditë 22103 2,178 243 12,050 8,131 22,602 Tepelenë 8949 2,353 294 13,669 16,060 32,375 Pukë 11069 2,361 177 14,080 8,980 25,599 Devoll 26716 2,406 222 7,818 1,301 11,748 Librazhd 31892 2,418 129 8,916 9,610 21,073 Fushë_Arrëz 7405 2,631 120 15,222 1,925 19,898 Divjakë 34254 2,712 212 6,473 16,962 26,358 Ura_Vajgurore 27295 2,794 316 4,698 5,546 13,353 Kuçovë 31262 3,052 242 6,617 1,181 11,092 Selenicë 16396 3,072 155 9,849 7,092 20,168 Pogradec 61530 3,086 185 6,708 1,159 11,138 Libohovë 3667 3,087 318 13,406 7,261 24,071 Rrogozhinë 22148 3,164 156 5,889 5,635 14,845 Kolonjë 11070 3,190 206 14,423 11,733 29,552 Vau I Dejës 30438 3,220 532 6,506 7,621 17,878 Shkodër 135612 3,421 356 5,863 1,035 10,675 Cërrik 27445 3,611 208 5,868 5,817 15,503 Fier 120655 3,638 549 5,643 5,961 15,791 Përmet 10614 3,841 266 12,779 13,836 30,723 Poliçan 10953 3,844 242 11,041 5,616 20,742 Elbasan 141714 3,849 258 5,911 5,334 15,352 Belsh 19503 4,012 160 6,352 9,564 20,089 Lushnjë 83659 4,026 311 5,751 3,895 13,983 Malësi e Madhe 30823 4,180 251 8,749 2,055 15,235 Tropojë 20517 4,196 189 10,670 4,636 19,691 Lezhë 65633 4,281 468 5,982 1,509 12,241 Berat 60031 4,296 344 7,255 7,095 18,990 Krujë 59814 4,493 258 5,054 4,846 14,651 Patos 22959 4,791 2,325 6,579 4,588 18,283 Kamëz 104190 4,794 34 4,611 535 9,974 Gjirokastër 28673 4,854 454 10,323 7,831 23,462 Finiq 10529 4,879 339 11,804 690 17,712 Vlorë 104827 4,942 368 6,217 1,667 13,193
40 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Konispol 8245 5,216 124 7,039 22,474 34,853 Delvinë 7598 6,103 347 11,870 9,636 27,956 Shijak 27861 6,111 283 5,185 2,993 14,571 Durrës 175110 6,739 448 4,896 3,205 15,288 Kavajë 40094 6,926 277 6,659 10,885 24,746 Skrapar 12403 7,209 624 15,067 14,177 37,077 Korçë 75994 7,221 333 7,667 9,237 24,459 Mallakaster 27062 7,245 307 7,655 12,783 27,989 Roskovec 21742 8,245 1,907 5,147 5,690 20,989 Tiranë 557422 13,023 504 4,326 1,254 19,107 Sarandë 20227 13,223 637 8,953 17,778 40,591 Vorë 25511 13,727 68 4,844 5,719 24,358 Dropulli 3503 13,810 631 20,115 15,728 50,284 Himarë 7818 20,763 184 14,008 41,963 76,919
national average 2,800,138 5,993 374 6,481 4,180 17,028
41
APPENDIX 2: COMPOSITION OF EXPENDITURES PER CAPITA (WITHOUT CONDITIONAL GRANTS) IN 2016
Pop. Wage
s
Goods and
Services
Other Operating Expenditur
e
Investment
Total Expenditur
e
Investment as % of
Total
Kurbin 46,291 4,081 2,662 330 652 7,726 8%
Prrenjas 24,906 4,397 2,103 470 886 7,856 11%
Kamëz 104,190 3,164 1,209 316 3,355 8,045 42%
Peqin 26,136 3,767 1,521 431 2,328 8,049 29%
Shkodër 135,612 3,558 3,301 753 516 8,128 6%
Krujë 59,814 3,886 1,922 614 1,993 8,417 24%
Vau I Dejës 30,438 3,785 1,317 425 3,277 8,805 37%
Belsh 19,503 4,210 1,766 353 2,627 8,956 29%
Ura_Vajgurore 27,295 3,985 1,547 385 3,068 8,985 34%
Librazhd 31,892 5,592 1,873 463 1,394 9,323 15%
Divjakë 34,254 4,075 2,459 716 2,471 9,722 25%
Pogradec 61,530 5,137 2,555 809 1,254 9,756 13%
Cërrik 27,445 4,561 2,720 685 1,878 9,846 19%
Maliq 41,757 4,642 1,710 327 3,217 9,897 33%
Elbasan 141,714 5,275 2,624 644 1,450 9,995 15%
Lushnjë 83,659 4,913 2,996 568 1,542 10,020 15%
Klos 16,618 4,907 2,203 610 2,318 10,039 23%
Kuçovë 31,262 5,876 2,137 354 2,089 10,457 20%
Devoll 26,716 4,658 2,768 778 2,314 10,520 22%
Kukës 47,985 6,439 2,685 830 1,115 11,071 10%
Dibër 61,619 5,557 1,584 546 3,863 11,551 33%
Mat 27,600 6,445 2,425 732 2,000 11,603 17%
Lezhë 65,633 6,657 2,470 867 1,672 11,666 14%
Vlorë 104,827 4,478 4,907 1,466 914 11,766 8%
Rrogozhinë 22,148 4,371 4,197 202 3,111 11,882 26%
Bulqizë 31,210 5,421 2,808 396 3,268 11,894 27%
Konispol 8,245 5,488 3,754 589 2,301 12,133 19%
Memaliaj 10,657 6,508 2,918 1,221 1,511 12,160 12%
Shijak 27,861 3,800 4,183 1,185 3,032 12,202 25%
Durrës 175,110 5,186 2,760 849 3,428 12,224 28%
Pustec 3,290 7,555 2,121 467 2,260 12,404 18%
Mal. e Madhe 30,823 4,551 1,694 466 5,991 12,704 47%
Fier 120,655 5,547 3,423 1,455 2,406 12,832 19%
Has 16,790 6,142 2,685 525 3,561 12,915 28%
Berat 60,031 6,138 3,137 760 2,965 13,000 23%
Gramsh 24,231 6,735 3,351 923 2,202 13,211 17%
Mallakaster 27,062 6,751 3,159 846 2,537 13,294 19%
Patos 22,959 6,863 2,429 840 3,250 13,383 24%
Selenicë 16,396 5,591 2,972 1,167 4,095 13,826 30%
Finiq 10,529 6,853 4,519 1,162 2,087 14,623 14%
Korçë 75,994 6,396 5,348 1,234 1,872 14,851 13%
42 STATISTICAL BRIEF ALBANIAN LOCAL GOVERNMENT FINANCE ON THE AFTER TERRITORIAL ADMINISTRATIVE REFORM
AND BEFORE THE LOCAL GOVERNMENT FINANCE LAW
Përmet 10,614 10,373 3,396 845 734 15,349 5%
Poliçan 10,953 8,314 3,404 379 3,527 15,624 23%
Mirditë 22,103 8,303 3,293 404 3,755 15,756 24%
Kavajë 40,094 6,411 4,356 1,155 4,060 15,983 25%
Pukë 11,069 10,288 2,610 1,211 1,924 16,034 12%
Këlcyrë 6,113 7,115 2,123 863 7,055 17,157 41%
Gjirokastër 28,673 10,437 3,282 1,337 2,361 17,419 14%
Vorë 25,511 5,222 3,776 554 7,998 17,552 46%
Tropojë 20,517 6,771 3,147 583 7,135 17,636 40%
Delvinë 7,598 9,412 5,076 709 3,037 18,235 17%
Roskovec 21,742 5,219 2,779 568 9,740 18,307 53%
Kolonjë 11,070 10,875 4,243 1,508 1,930 18,557 10%
Fushë_Arrëz 7,405 10,334 3,762 1,502 3,300 18,900 17%
Libohovë 3,667 8,553 3,798 1,096 6,171 19,619 31%
Sarandë 20,227 10,219 8,810 1,729 2,260 23,020 10%
Tepelenë 8,949 10,727 3,224 1,253 8,672 23,876 36%
Skrapar 12,403 13,712 4,342 979 6,582 25,616 26%
Himarë 7,818 11,460 9,390 975 5,207 27,033 19%
Dropulli 3,503 13,190 12,542 3,341 6,222 35,296 18%
Tiranë 557,422 6,054 5,908 1,570 7,962 21,494 37%
Grand Total 2,800,13
8 5,573 3,567 947 3,626 13,714 26%
43
U.S. Agency for International Development Planning and Local Governance Project in Albania
Dervish Hima St. 3 Towers near Qemal Stafa Stadium
Tower No. 1, Apt. 91, Tenth Floor Tirana, Albania
Tel: + 355-04-450-4150 Fax: + 355-04-450-4149
www.usaid.gov