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Albania will cut VAT on 54 basic foods to 6% from 20% and nearly double the tax on dividends, Prime Minister Edi Rama said, as violent student-led protests shake Tirana.
Rama set out the measures in a televised address on October 28, the day the government submitted the 2027 state budget to parliament. The food VAT cut covers meat, fish, dairy, eggs, flour, oils, sugar, pasta, fruit, vegetables and basic baby foods, and will leave about €150mn a year with households, he said.
To pay for it, the standard VAT rate rises by one percentage point to 21%, the dividend tax goes to 15% from 8% and the VAT rate for hotels climbs to 10% from 6%, with agritourism exempt. Rama said the corporate profit tax would remain at 15%, which he described as "the highest rate in the Western Balkans"; Confindustria said the draft it was opposing would raise the rate to 17%.
The package is an attempt to answer the cost-of-living anger behind weeks of street protests with a redistribution budget, while drawing more revenue from big business, the wealthy and the informal economy. Business groups, which had already warned of the cost of the draft measures, say the government is breaking a promise not to raise their taxes during its mandate.
"We want more businesses, more companies, more private investments, small and large, domestic and foreign. We also want as many rich people in Albania as possible, because the problem is never the rich, but the gap between those who have a lot and those who have very little," Rama said.
Who pays more
The salary tax changes cut in both directions. The upper threshold of the income tax band rises to ALL300,000 (€3,300) a month from ALL200,000, a move Rama said would benefit 32,000 middle-class taxpayers. A new top band of 30% applies to monthly salaries above ALL700,000, which he presented as a way to stop high earners paying themselves in dividends to avoid tax.
The threshold for compulsory VAT registration halves to ALL5mn in annual turnover from ALL10mn from January 1, 2027. The finance ministry's report on the draft decision estimates the change will bring about 17,516 businesses into the VAT system and raise VAT revenue by about ALL4.5bn, Monitor reported.
"We cannot allow many small businesses to continue to be abused by serving as a shell for large businesses to hide in," Rama said, adding that the government's pledge of zero profit tax for all small businesses by 2029 "remains intact".
The package also includes a super tax on luxury cars, while separate legislation will bring higher property taxes on empty apartments and coastal villas. The circulation tax will be taken out of the fuel price, cutting the pump price by ALL32 (€0.35) a litre, and charged on vehicles instead, with a new levy on foreign cars entering the country. A new revenue control bureau at the finance ministry will check the income declarations of high earners.
Rama pitched the measures as a dividend of growth. The 2027 budget is the first to exceed €10bn, he said, and pension increases will be doubled from January.
Business pushes back
Confindustria Albania said the government had publicly committed to keeping the 15% corporate income tax rate for large companies unchanged for its whole mandate. Its statement, published on October 28, opposed the draft package's proposals to raise that rate to 17%, the dividend tax to 15% and standard VAT to 21%, and called for them to be withdrawn.
"The government must explain why it is reneging on its promise. What has changed since it made this commitment? What new needs make this choice essential?" the association said.
For a company that distributes all its after-tax profit, the combined burden of profit and dividend tax would rise to 29.45% from 21.8% under the draft rates, Confindustria calculated. "For every 100 lek of pre-tax profit, the state would collect 7.65 lek more: an increase of approximately 35% in the combined tax burden," it said.
The association also pointed to finance ministry data showing budget revenue exceeded spending by about ALL70.3bn (€774mn) in January-September, while public investment reached only 75.2% of plan. "Before requesting more resources, the State must account for how it manages and uses the resources it already collects," it said.
"Businesses that declare and pay regularly cannot continue to be the automatic solution to every new budget requirement," it added.
The Union of Albanian Producers said the package puts extra pressure on domestic production and leaves it at a disadvantage against imports. Its secretary general, Arben Shkodra, called the package "absurd and paradoxical" in an interview with Top News, and criticised the speed of its approval, according to a summary on the union's website.
Shkodra welcomed the VAT cut on basic foods but questioned whether it would bring lower prices, and how stocks already bought with 20% VAT would be treated. Input costs, rising energy and fuel costs, competition from imports and informality were the producers' main concerns. "The voice of entrepreneurship must be heard before any decision-making of an economic nature," the union said in an earlier response to the draft.
Exporters want the package to go further on labour costs. ProEksport Albania asked the finance and economy ministries to raise the non-taxable salary threshold to ALL60,000 a month for all employees from January 1, 2027, Ekofin reported on October 21. The association, which represents clothing and footwear makers among others, said the lek's continued strengthening against the euro and rising production costs had weakened the competitiveness of Albanian exports, and asked for grants, tax incentives and simpler access to finance.
Stones on the boulevard
The tax package lands in the middle of the most serious unrest of Rama's 13 years in office. Student protests over university conditions, the cost of education and job prospects turned violent on October 13, when demonstrators threw bricks and concrete blocks at the Education Ministry and police responded with tear gas and water cannon.
The police chief said 71 officers were injured in the first three days, while the EU called for an investigation into police violence. The students have rejected Rama's offers of dialogue and are demanding his resignation, and opposition leader Sali Berisha has called a national rally for October 31.
The student movement has merged with the wider Flamingo Revolution, which began in late May as a campaign against a luxury resort linked to Jared Kushner on the protected Zvernec lagoon and grew into a broader protest over corruption and the government's accountability. The government has responded with tougher protest laws, including fines for unauthorised demonstrations and compensation for damaged businesses.
Rama used the same address to attack the protesters as "a crowd of urban bullies and online stalkers" who had broken the windows of the Education Ministry and nearby shops.
"These weeks of bum-booms have no chance of removing the government, but they have hit the economy and Albania itself, which for two weeks has been exporting views that do not invite tourists, but are driving them away; that do not invite investors, but are driving money away from the country," he said.
He also offered students a ALL15,000 monthly increase in scholarships for those from poorer families, bringing them to ALL25,000, about half the minimum wage, and extended them to master's level.
Growth slows
The government can afford the giveaways because revenue is running ahead of plan. Public revenue rose 11.3% y/y to ALL626.6bn in the first nine months of 2026, with net VAT receipts up 29%, while capital spending lagged at 75.2% of target.
Growth is cooling, however. The IMF expects GDP growth of 3.5% in 2026 and 3.2% in 2027, after 3.7% in 2025, with inflation accelerating to 3.2% in both years from 2.2%. The World Bank forecasts growth easing to 3.4% this year.
Rating agencies have looked more kindly on the public finances. Moody's raised Albania's outlook to positive in September on stronger fiscal and external positions, and Rama said public debt had fallen to a historic low.
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