VAT Refund Reduction, Rrapaj: Consequences and Alternatives to Problem Solving

Reduction of VAT refunds for agricultural products from 20% to 6%, making the 14% difference burden on the producers has created many problems. Farmers have emerged in protests by throwing their products on the streets. Regarding this topic, the chairman of the Albanian Agribusiness Council, Agim Rrapaj, invited to TV Scan, talked about the problems created, the farmers’ response and the measures to be taken to resolve this situation. He emphasized the effect of this legal change, which cited as a result of increased informality, loss of traceability and increased food insecurity. Under these conditions the collectors will be directed to the import products by abandoning domestic products. The KASH Chairman also presented the possible alternatives to solve this problem.

Full interview

In what situation is a producer or collector today due to legal changes?

The situation was tense and the reaction was expected. This change has been done without studying the terrain, without consulting the stakeholder groups and without making a proper study of the possible consequences, as a result we face this situation today, which is no worse. To change a fiscal package or change the law on VAT, a very large study had to be done and consulted with interest groups in order to find a solution for all parties. We have been opposed to such a change. The Ministry of Finance should cooperate with the Ministry of Agriculture and Rural Development, which has not happened. Legislators prior to adopting this measure should discuss the respective committees with interest groups.

Why is it hurry to adopt such a legal change?

The reason for us remains undiscovered. There are indications that the farmer did not receive 20% of the VAT from the crusher. This 6% measure, which is in force today, has been in the past. The reason for this reimbursement is that this sector is formalized, the products are sold, the opportunity to make contracts becomes bigger and on the other hand we can identify the whole product. We are in a situation today that this 14%, from collectors can not pass to farmers. Farmers are in a situation that they have no room to lower the selling price of their products. Farmers are reacting fairly, as the arguments they give are not convincing arguments for them. Even the VAT deduction measures on inputs have no bearing on livestock farmers, as 75% of livestock consuming milk products have not been affected at all by input measures, remains only 25%, but this measure has not yet been seen as it will take some time to accomplish.

Is there a category that benefits from changes in the fiscal package?

There is a category that benefits and in this case will benefit the importers, they will benefit subsidized products in other countries that are at a cheaper cost than our products and under these conditions will benefit those collectors who have not bought products the country to date. The tendency to benefit is higher for importers than for those who have concluded agreements with farmers. Will there be lower domestic production? Certainly there will be lower domestic production and other problems associated with investments made by collectors. Here is the emergence of the conflict, already forced farmers are joining the gatherers as they have no choice because they have been able to sell their product to date. In 2013 there were only 6 thousand formalized farms and today there are 41 thousand farms and the only economic mechanism was VAT. Now this value of formalized farms will decrease as there is no need for NIPT. With 6% VAT refund no interest.

Which sector is more at odds with these legal changes?

Everyone is in trouble, first of all we mention the farmers. Import of dairy and by-products, meat and its by-products are among the basic foods and imported about 200m euros at the time of reimbursement by 20%, the more so now. All other products are also discriminated against in relation to products that are imported and are subsidized from abroad.

Has the market reaction started so far as you have observed so far?

The reflection has begun and has really started with a strong reaction from the farmers, as well as with the attraction of domestic market collectors. All of these together lead to a collapse, are the defeat and the days of protests or products being thrown into the streets. The problem is that the informality will increase, causing more concerns regarding food safety. We will again have farmers who will want to sell directly to the market and not through the gathering. That way, we will lose traceability. Three are the solutions that appear in this case. The first is returning to the reimbursement of 20%, the second solution concerns the unification of 6% in sales and 6% on purchases, just as Europe has. The third element is to set a 14% barrier for all domestic products being imported and competing unfairly from subsidized products in other countries. Under these conditions we are obliged to find one of these solutions. The problem is solved by uniting business associations, farmers themselves, collectors, and consumers alike.

Do they have access to subsidies for small farmers, as it seems as if we have a subsidy cut?

I do not see the problem of reducing the programmed fund, as this year we have more than any other year. The problem lies in fund disbursement rather than programming. We have more funds since we have the IPARD program, the funds of GIZ SARED which are considerable, we have more than 4 million euros from subsidy schemes, the program “100 villages” etc. The problem remains the disbursement and we create these barriers, these conflicts that prevent us disbursement. The measures to be taken are said several times. First we must equip the property certificates, in the rural areas we have not stabilized and updated the ground surface which is the base, secondly we need to identify all the assets we have, we have over 9000 unregistered tractors. We are not working for environmental protection, with this oil price and energy we can not attract investors. Another negative element is the interference with VAT reimbursement and the fiscal package as a whole, where we can take as an example the growth of plastmas price for greenhouses where no explanation has been given and has not intervened to fix it.

For what part of the subsidies should measures be taken to get these funds to farmers?

We have made some concrete proposals. A good part of the farmers were excluded due to the lack of ownership certificates. Farmers are asked for a certificate of ownership for the stables, which is quite difficult as they keep them for only 2 months and do not build stalls that can be cleared. These are excluded from the subsidy and especially from IPARD. The second element concerns the way of building application files or non-formalization of farms. We have proposed concrete measures for the formalization of farmers, through the electronic card, the introduction of the electronic register and just like the KBC, to have a single center for farmers’ registration. In this way we will have the opportunity to make the sector comparable to other countries.

Is your expectation of setting up a national center for farmers, such as the one for business, to be considered?

We are waiting these days to discuss with Minister Çuçi and Minister Denaj, we left in the middle of this discussion. Next year, we will become a census and we think we will make a very good combination of the proposal we have made and the census on the other hand, to have the opportunity to identify all the assets that we have in rural areas. We have untapped assets as a result of lack of cooperation, lack of innovation and mechanization and we can use them until they have abandoned all rural areas and create opportunities for those who want to return. Only by creating this ground we have the opportunity to develop agriculture, livestock and rural areas as a whole. Warming for the funds allocated to the “100 villages” program. There is a pattern in these 100 villages, but we have to change directions everywhere in rural areas, as we can not go on with traditional agriculture, but to go to agrotourism, the environment and the processing of traditional products. We have extraordinary cultivars that are not found anywhere.

Recently, we have a large number of Albanians who have left the country or are willing to leave. Has this been observed in rural areas by adding the land to the land?

The changes that have been made have caused a surplus of products, we have not had a sustainable development of our farms. We have a very big problem in terms of horizontal cooperation. We are not united on the ground and if we do not consolidate on the basis we will have difficulties in vertical co-operation in order to make the value chain. We have a lot of movement from rural areas, moves that are leading to the growth of land surface and lowering the number of heads from year to year. This is explained by the mood of the markets and the increase in the cost of the product.

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