The Effects of Albanian Tax Policy on Trade Balance and the Opportunities of Income Increase within the Framework of Integration in the European Union

This study aims to analyze the evolution of Albania’s tax system from 2004 to 2024, with a particular focus on identifying both its achievements and shortcomings. The study also explores the potential reserves within the system and proposes strategies to increase budget revenues from taxes and fees, especially in light of Albania’s goal of European Union integration. A key aspect of the research is the examination of the relationship between Albania’s budget deficit and trade deficit, referred to as the "twin deficit," which has been underexplored in the context of Albanian fiscal studies. The study underscores the importance of tax revenues as the primary source of government income, which is essential for financing capital investment and social protection programs at both the national and local levels. Given the increasing demand for public spending, the study stresses the need for higher tax revenue growth to sustain fiscal stability, control the budget deficit, and manage public debt within sustainable limits. The research examines tax policies in Albania, particularly over the last decade of its transition period, considering the significant challenges posed by the lack of a pre-existing legal framework. Following the collapse of the communist regime in 1991, Albania had to establish its tax system from scratch, relying on legal practices from European countries with consolidated market economies and support from international institutions such as the EU, IMF, WB, and EBRD. The study adopts a mixed-methods approach, combining statistical analysis of tax revenue trends with qualitative assessments of policy reforms and international support. The findings highlight both progress in reforming the tax system and persistent challenges, including issues with tax compliance, administrative inefficiencies, and the alignment of tax policies with EU standards. Based on these findings, the study offers recommendations to improve tax collection efficiency, broaden the tax base, and enhance fiscal policy coherence with EU requirements.