Fausta Gjika 20.04.2023
Essay in Labor Law Class
Topic: Middle class taxation and living expenses in 2023
The 2008 economic crisis that is still affecting the global economy and the pandemic and
the war, all have contributed to an uncertainty of our personal finances. The obvious
phenomenon that we can all see, is that the lower class is getting poorer, and the upper class is
getting richer. In this case, what is going to happen with the middle class? As it appears, this
class is getting “extinct”, and this can produce more problems. Like Aristotle said: “The most
perfect political community is one in which the middle class is in control and outnumbers both of
the other classes.” and there are solutions to avoid more serious problems.
Albania as an EU candidate state is slowly adapting EU labor regulations and standards
in order to fulfill the legal criteria on social rights and to reach as much as possible the HDI of
other similar EU member states. However, we can say that the challenges are getting in the way.
I believe that because Albania is still a developing country, it reflects very rapidly the economic
trends of the western world with which we have more connections. There are, of course,
numerous reasons why the middle class is disappearing in Albanian society, but I would say that
the biggest reasons are incorrect and nearsighted policies that the government has implemented
especially after 2010.
Firstly, after 1991 when the communist regime fell, the following governments have
changed many of their policies in short periods, including personal income taxation. After
analyzing the directives of the Ministry of Finance from 2004 to 2022, we can see for example
that in 2004 and 2005 there is a big difference when it comes to classifying the income in
classes. In 2004’s directive we can see 8 groups where the minimum wage with zero taxes starts
the same at 14’000 lekë and the biggest amount is 150’000 lekë which is different compared to
2005’s directive which the
largest amount taxed was
500’000 lekë.
The income taxation
in 2005 implicated that, if a
person earned in their job
less than 14 '000 lekë (113
euros at that time), they did
not have to pay any personal
income tax. We can see that
in 2005 the percentage went
, from 0% to 5, 10, 15, 20, and up to 30%. If you earned more than 14 000 lekë, the foundation tax
was 0% but you would pay 5% of the amount earned over 14000 lekë. For example, if somebody
earned 35000 lekë (284 euro), it would be calculated like: 14 thousand (0%) plus 21 thousand
lekë (taxed 5%), which means that one was taxed 1050 lekë. The same formula is applied on
other margins. The greatest tax rate was set for the income of 500 '000 lekë that was taxed 30%
the amount over 200' 000 lekë. The law of personal income taxation has been reformed and
changed 48 times in twenty-one years, even multiple times in one year. This phenomenon is
common in Albanian politics, as people’s needs are reliant on political ties. In general elections
period, law amendments are very common and extreme, and this is one of the greatest reasons
why the new policies are not effective. It is very important to apply a law that is long-term and
sustainable, because in this case the results are clearer. Rapid law reforms based on political
interests, cause confusion and unstable economy.
Despite several changes in tax law, we can conclude that today’s formula is the same
when it comes to the minimal, as it divides the salary into three groups where the minimum
group with 0% tax is 30 '000 lekë. Beside this, a determining role plays the social and health
insurances as well. The law “FOR THE COLLECTION OF MANDATORY SOCIAL AND
HEALTH INSURANCE CONTRIBUTIONS” changed in 2014, includes insurances in case of
sickness, accidents in the workplace, pregnancy leave, sudden unemployment and pension.
Insurances Total paid to state (%) Paid by employer Paid by employee
Social insurances 24.5 15 9.5
Health insurances 3.4 1.7 1.7
Total 27.9 16.7 11.2
The middle class is considered to be the brain of the
society, for as they are at a very large percentage
educated and have financial capacity to take financial
risks such as opening businesses. Factors that contribute
to this class disappearance, may also affect the economic
and social development of the society. For instance,
families that used to be in the middle class, will fall near
the lower class, where they will have at the same time
less opportunity to be educated (university degrees) and
will not be brave enough to take risks because the
money they would generate would be enough only for
survival. As we can see from the payment calculator,1 a
1
http://boshti.com/calc/index.html
Essay in Labor Law Class
Topic: Middle class taxation and living expenses in 2023
The 2008 economic crisis that is still affecting the global economy and the pandemic and
the war, all have contributed to an uncertainty of our personal finances. The obvious
phenomenon that we can all see, is that the lower class is getting poorer, and the upper class is
getting richer. In this case, what is going to happen with the middle class? As it appears, this
class is getting “extinct”, and this can produce more problems. Like Aristotle said: “The most
perfect political community is one in which the middle class is in control and outnumbers both of
the other classes.” and there are solutions to avoid more serious problems.
Albania as an EU candidate state is slowly adapting EU labor regulations and standards
in order to fulfill the legal criteria on social rights and to reach as much as possible the HDI of
other similar EU member states. However, we can say that the challenges are getting in the way.
I believe that because Albania is still a developing country, it reflects very rapidly the economic
trends of the western world with which we have more connections. There are, of course,
numerous reasons why the middle class is disappearing in Albanian society, but I would say that
the biggest reasons are incorrect and nearsighted policies that the government has implemented
especially after 2010.
Firstly, after 1991 when the communist regime fell, the following governments have
changed many of their policies in short periods, including personal income taxation. After
analyzing the directives of the Ministry of Finance from 2004 to 2022, we can see for example
that in 2004 and 2005 there is a big difference when it comes to classifying the income in
classes. In 2004’s directive we can see 8 groups where the minimum wage with zero taxes starts
the same at 14’000 lekë and the biggest amount is 150’000 lekë which is different compared to
2005’s directive which the
largest amount taxed was
500’000 lekë.
The income taxation
in 2005 implicated that, if a
person earned in their job
less than 14 '000 lekë (113
euros at that time), they did
not have to pay any personal
income tax. We can see that
in 2005 the percentage went
, from 0% to 5, 10, 15, 20, and up to 30%. If you earned more than 14 000 lekë, the foundation tax
was 0% but you would pay 5% of the amount earned over 14000 lekë. For example, if somebody
earned 35000 lekë (284 euro), it would be calculated like: 14 thousand (0%) plus 21 thousand
lekë (taxed 5%), which means that one was taxed 1050 lekë. The same formula is applied on
other margins. The greatest tax rate was set for the income of 500 '000 lekë that was taxed 30%
the amount over 200' 000 lekë. The law of personal income taxation has been reformed and
changed 48 times in twenty-one years, even multiple times in one year. This phenomenon is
common in Albanian politics, as people’s needs are reliant on political ties. In general elections
period, law amendments are very common and extreme, and this is one of the greatest reasons
why the new policies are not effective. It is very important to apply a law that is long-term and
sustainable, because in this case the results are clearer. Rapid law reforms based on political
interests, cause confusion and unstable economy.
Despite several changes in tax law, we can conclude that today’s formula is the same
when it comes to the minimal, as it divides the salary into three groups where the minimum
group with 0% tax is 30 '000 lekë. Beside this, a determining role plays the social and health
insurances as well. The law “FOR THE COLLECTION OF MANDATORY SOCIAL AND
HEALTH INSURANCE CONTRIBUTIONS” changed in 2014, includes insurances in case of
sickness, accidents in the workplace, pregnancy leave, sudden unemployment and pension.
Insurances Total paid to state (%) Paid by employer Paid by employee
Social insurances 24.5 15 9.5
Health insurances 3.4 1.7 1.7
Total 27.9 16.7 11.2
The middle class is considered to be the brain of the
society, for as they are at a very large percentage
educated and have financial capacity to take financial
risks such as opening businesses. Factors that contribute
to this class disappearance, may also affect the economic
and social development of the society. For instance,
families that used to be in the middle class, will fall near
the lower class, where they will have at the same time
less opportunity to be educated (university degrees) and
will not be brave enough to take risks because the
money they would generate would be enough only for
survival. As we can see from the payment calculator,1 a
1
http://boshti.com/calc/index.html
