Jasmin-Leyla Virta – Pike & Hurricane

UF trip to Albania

Isa Tiilikainen and Jasmin-Leyla Virta — Tue, 05 Nov 2019 13:57:12 +0000

Albania is said to be one of the oldest European nations and yet the history and the culture of the nation and the country itself are not very familiar to most of us. In the beginning of October 2019 we had the unique chance of travelling to Albania and getting to know the country as part of the fall trip arranged by UF Malmö.

On the first day of our trip, we took part in a walking tour of Tirana, saw a lot of important sights and heard interesting stories of its history. All the historical facts about Albania in this article are based on the information presented by the local guide on the tour.

The capital surprised us with its beauty, tons of greenery and colorful houses. The metropolitan area of Tirana hosts 1 million citizens, which is around a third of the country’s whole population.

The city of Tirana is located next to the mountains, to one of which we took a day trip.

Landscape of Tirana from Mount Dajti

Painting the city’s buildings in bright colours in the early 2000’s originally was the idea of the then city mayor, now Prime Minister of Albania, Edi Rama who is also a painter. It was his vision to highlight the bright and happy future ahead after the grey years of communism.

During our trip we gained a lot of insights into the historical chapter of Albania, in particular, when it was a lesser known communist dictatorship within Europe. However, this nation’s history starts from the ancient times, when the country was part of Illyria. Before the modern era, Albania was ruled under the Roman, the Byzantine and most significantly the Ottoman Empire, until it gained independence on 28th November 1912.

The most prominent feature of Albania’s recent history, has been it’s strict communist rule under Enver Hoxha from 1944 until 1991. Albania sometimes even was referred to as the ‘’North Korea of Europe’’ due to the personal cult surrounding Hoxha, strong restrictions to citizens freedoms and severe violations of human rights during this time period.

Small statue of Hoxha together with a statue of Lenin and two of Stalin

The beginning of Hoxha’s rule was strongly influenced by the Soviet leader Josef Stalin as Hoxha followed his footsteps in creating a communist regime with a closely planned economy. In the 1950s, once the Soviet Union abandoned Stalinism, Albania tightened its relations with the People’s Republic of China led by Mao Zedong but eventually also this relation was destroyed and Albania was left without allies. This lead to the isolation of the nation, and no man could freely enter or leave the country.

In the 1980s the Pyramid of Tirana was the Enver Hoxha Museum, today, it is waiting to be reconstructed as a youth center

The communist era was marked by Hoxha’s paranoia of foreign powers invading Albania. Its legacy is still one of the most visible features of the country, as the leader built over 700 000 bunkers all over the country to protect the people. Today, a great amount of these bunkers are still visible in the Albanian landscape and two museums called Bunk’art 1 and 2 are telling the story of communist Albania to the public.

Reconstructed bunker in the city center of Tirana

Collection of bunker photos at Bunk’art 1

In 1991 communism collapsed in Albania, surprisingly through elections, and the country was ready to open its borders and contribute to the international community.

Germany donated a piece of the original Berlin Wall to Albania as a memorial after the collapse of Communism

One rather ironic part symbolizing the end of communist era in Albania is the site of former leader Enver Hoxha’s house. The first international fast food chain ever to arrive in Albania was Kentucky Fried Chicken, and today their restaurant is located across the street from Hoxha’s house, the face of the logo smiling directly at it.

Enver Hoxha’s house

Since the communist rule, Albania has been developing rapidly, striving to get rid of the organized corruption and other societal issues, and today it is a member of many international organizations such as NATO and WTO. The modernization and shift to market economy took place quickly, as in the past 27 years the country has been able to establish remarkable reforms.

The country today is very pro-west and eager to join the EU, with as much as 94% of the population in favor of joining. Our visit in the Swedish Embassy in Tirana gave us more profound insights on Albania’s possible EU accession, and we discussed the role of Sweden as a big supporter of Albania’s accession after 50 years of bilateral cooperation. As you are reading this article, the EU leaders are discussing the opening of accession negotiations with Albania.

During our trip we also heard about the most current political and societal situation of Albania, when visiting CRCA – Children’s rights center Albania and Roma Active, an NGO helping Roma and working on challenges the minority faces in Albania. These visits gave us a lot of information about the current issues the nation is facing, especially in terms of becoming an applicant to the EU. One large problem is the fact that young people are leaving the country to study or work abroad and are not returning. NGOs like CRCA are working towards building trust and safety net for young people to return and invest in their home country. Though there are still major issues with transparency, grass-root corruption and trust in politicians, Albania seems to be on the right path in terms of becoming more and more democratic. It is likely that within the next decade, Albania will be ready to officially begin the EU application process, which we think would be beneficial to all parties.

UF Malmö visiting CRCA

by Isa Tiilikainen & Jasmin Virta

Photo credits

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Moving money out of the public eye: tax evasion in the EU

Isa Tiilikainen and Jasmin-Leyla Virta — Sun, 29 Sep 2019 13:49:02 +0000

Tax fraud and tax evasion within the European Union (EU) form a big problem that concerns all EU citizens. For instance, in 2017 the EU lost 137 billion euros in value-added-tax revenues, but taking also other types of tax frauds into account, the estimates of lost revenues due to tax evasion and avoidance go all the way up to 1 trillion euros.

Tax avoidance and evasion can be carried out in different ways, such as aggressive tax planning by taking advantage of loopholes in legislation or by transferring money to tax havens. Tax havens are often associated with remote and foreign states but, despite the close economic integration of the EU, can also be found within the Union.

Today, tax avoidance is a recognized problem in the EU, so how is it still possible?

Free movement of capital facilitating tax avoidance

The free movement of capital is one of the EU’s four freedoms and the basis of the European Single Market meaning that all restrictions and limits on the movement of capital – for example, on buying and selling shares and assets, as well as foreign investments between member states being prohibited. This freedom, related to banking secrecy, has created an opening for tax frauds – or at least made the monitoring of tax compliance trickier.

The EU has been working on harmonizing taxation and legislation in the member states, but still there are big differences regarding state provided tax reliefs and tax transparency. This has offered more room for systematic tax planning, tax avoidance and, eventually, tax evasion. As the taxation differs from one member state to another and the tax rates can be notably lower, tax payers, investors and companies might consider directing their income and profits through a different member state that is not their country of residence. Due to this, a total of seven EU member states, Belgium, Cyprus, Hungary, Ireland, Luxembourg, Malta and the Netherlands, are considered tax havens.

In recent years, this action has been closely observed through the Luxembourg Leaks – a major investigation revealing that over 300 foreign companies avoided taxes by channelling the taxation through Luxembourg where companies pay significantly lower corporate taxes than in other European states as the state’s legislation makes offers of substantial tax relief and deduction deals in privacy.

Several multinational companies, such as Disney, Pepsi and IKEA, profited financially by centralizing their income stream on European market through Luxembourg where they had to pay less than 1% taxes of their profits whereas taxation in other EU countries could have cost them billions of euros more, as the average corporate income tax rate in the EU countries is currently around 21,3%. Similar taxation deals are found for example in Ireland with Apple and in the Netherlands with Nike, as revealed by an investigation of the so-called Paradise Papers.

Zero-sum game?

Free movement of capital and tax planning within legal framework can create healthy competition and maximize profits for all actors, the EU, the member states, the companies, as well as individuals. However, at worst, harmful tax competition can unbalance the equality between the member states.

According to Spanish Member of the Parliament, Miguel Urban, the problem with tax evasion is the lack of fiscal unity in Europe which leads to fiscal competition and dumping aimed at attracting companies and capital. One can even argue that free movement of capital facilitates tax evasion. Miguel Urban states: “We are returning to a feudal system, where the feudal lords don’t pay any tax. This aristocratic class and modern feudalism is called Bono, Messi, Christiano Ronaldo as well as Nike, Apple and Amazon. It’s a class that positions itself not only above the middle class but also above small and medium-sized businesses. It’s a new nobility that believes to be above the law.’’

States’ right to choose their form of taxation is an argument often referred to by the tax-avoiding nations. For example, many Luxembourgers have publicly expressed this opinion, as a spokesman for the Luxembourg Finance Ministry says: “Each country should be free to fix taxes according to its national priorities”. Many lobby organisations promote this view as well, as Nicolas Mackel from Luxembourg’s financial lobby puts it: “Competition is healthy. And it is legitimate. To align the rules would certainly increase taxation. And that is not necessarily the most appropriate thing”.

These opposing views have created some contradictory outcomes mainly associated with the President of the European Commission, Jean-Claude Juncker. Previously Juncker has been the Finance Minister of Luxembourg, meaning that he has been one of the main actors preparing the tax relief deals with multinational companies, but as the President of the Commission he has been forced to fight against these deals and tax evasion.

However, with regards to the internal market system of the EU, it is evident that when one country offers tailored tax deals to multinational corporations, it steals the revenue from all the other countries. When multinationals dodge taxes, the gap has to be somehow compensated for and this often means increasing taxes on small and medium-sized enterprises, lower- and middle-income households and cutting back on public services.

The EU loses around 20% of its corporate tax revenue to tax havens. The woeful part about tax evasion is its clear connection to inequality between citizens all over Europe. Had the correct amount of corporate taxes been paid accordingly, there would be no need for any budgetary cuts.

Time to act

Recently the EU has taken measures to combat tax evasion as one of the focus points of its agenda.

One of the most effective and recent actions of the EU in the fight against tax evasion is the Anti Tax Avoidance Package based on the recommendations of The Organisation for Economic Cooperation and Development (OECD). The package was introduced in 2016 and aims at achieving fairer and more coherent corporate taxation by increasing transparency and helping the member states to act united against tax frauds. As a part of this package the Anti Tax Avoidance Directive, creating a minimum level of protection against tax avoidance, was applied on 1 January 2019. The directive includes rulings against profit shifting to low-tax countries, to prevent double non-taxation and to discourage artificial debt arrangements.

Even though these measurements are now applied, the fight against tax evasion is still in its early stages. Like with many other major issues within the EU there seems to be more talking than taking action. One reason for this is the fact that taxation is still very highly associated with member states sovereignty. As a consequence, policies and rulings related to taxes are handled in the Council of the European Union with unanimity which means that one single member state can obstruct the proposed changes and legislation if it collides with their own national interest.

Issues with a cross-border dimension, like aggressive tax-planning and evasion, are hard to tackle with only domestic policies. The EU’s internal market structure between 28 member states can both be the accelerator of the problem, as well as the key to a possible resolution.

Written by Isa Tiilikainen & Jasmin Virta

Photo Credits

Bad Weather, Frédéric Schneider, CC BY-NC-ND 2.0

Commission President Jean-Claude Juncker debated the last EU summit, Pietro Naj-Oleari (European Parliament), CC BY-NC-ND 2.0

Members making statement during vote on motion of censure against the Commission, Pietro Naj-Oleari (European Parliament), CC BY-NC-ND 2.0

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