This content is from: Local Insights

Legalisation of informal capital

Dr Teuta DobiEndrit Shijaku

In an effort to make the most of the potential of the economy and to allow those holding so-called informal capital to begin freely investing with a clean slate, the government of Albania has put forward a much-debated law that provides for a limited tax amnesty and, more importantly, legalisation of capital. The law was recently passed by the Albanian parliament and takes effect from May 18 2011.

Some of the most debated and controversial aspects of the law are the provisions allowing for the legalisation of informal capital – essentially capital that has not been declared to the authorities and thus has not been taxed either in Albania or another country. It has been argued that this amnesty could be counter-effective in that it may very well dilute the preventive value of the criminal and administrative sanctions in place by fuelling the hopes that a similar amnesty could again be enacted sometime in the future. As with previous amnesties the question was raised whether, at this stage in the country's development, it would give out the wrong signal.

The initial draft law envisaged having a wider scope of amnesty which included pardons for certain criminal offences. However such legal provisions pardoning people/entities for criminal offences would have actually required a supra-majority vote of the Parliament (requiring the votes of the opposition party). An example of why the Albanian Penal Code would have been required to be amended and its application excluded for those benefiting from the amnesty is in relation to potential money-laundering crimes. Under the Penal Code, charges in relation to the laundering of proceeds of crimes should be brought even in the cases where a charge cannot be brought in relation to the crime itself (where the prescription period has lapsed, for example). Accordingly, for the amnesty to have this wider scope, which would have granted the required pardon from prosecution for such money laundering charges, the law must have been approved with the qualified majority of votes (same majority thresholds as required for the approval of the Penal Code) rather than the simple majority held by the coalition party in power.

With the composition of parliament at present, this meant that the votes of the opposition party would have been required in relation to an amnesty from the offences relating to laundering the proceeds of crime.

However the opposition party disapproved of the draft law; hence amendments were made, and the amnesty was approved with a more limited scope thus circumventing the required qualified vote of the parliament. As it now stands, the relief that this new law grants is far from a fully-fledged amnesty and relates only to offences in connection with due payment of taxes.

A charge for tax evasion or a charge for non-payment of taxes may, under the Penal Code, still be brought but only after the accused has been subjected to an administrative offence. Thus, in approving the amnesty for administrative offences by the achievable simple majority of votes, it has in effect, through procedure, also granted an amnesty for criminal charges being brought for those same offences.

Dr Teuta Dobi (president, European University of Tirana) and Endrit Shijaku

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