Eight years after families and businesses in Tirana pay the tax for education, the municipality has built only 9 of the 17 schools it had promised. The costs of the 9 schools are equal to 92% of the tax revenue collected so far. Expenses beyond the initial planning have forced the municipality to postpone the tax collection until 2025, while the time and budget to build the other 8 schools are not in favor of the municipality.
Author: Jona Cenameri
"The education tax is an unfair burden for me. I don't get anything out of it. My children are grown up, they have finished their pre-university education", says Arbeni, a resident of Administrative Unit no. 2, in Tirana. The 61-year-old has a shop where he sells paints, while his wife has a tailor shop. These two modest businesses are the sources of income for them. They are taxed individually as businesses and together as families. In total, they pay about €100 per year.
Residents of the capital pay this temporary tax since January 1, 2016, according to Decision of the Municipal Council no. 59, dated 30.12.2015. All families are subject to the tax, but also natural or legal persons, local or foreign, who reside and exercise economic activity within the territory of the Municipality of Tirana. Families are taxed 1,800 ALL per year (in equal, monthly installments) on the water bill. Businesses, according to categories, pay from 4,000 ALL to 37,000 ALL per year.
The time frame and efficiency of the tax has "provoked" discussions. "The temporary tax for educational infrastructure with its application for a long time is turning into a burden for citizens and businesses. On the other hand, we have a lack of transparency regarding the use of the income from this tax. A business pays this tax twice, once in the water bill and once with business taxes, and this causes a burden in taxation", says the Constitutional Law expert, Prof. Dr. Migena Leskoviku.
According to the Municipality of Tirana, the main purpose of the tax was to avoid teaching in two shifts through the construction of new schools. Feasibility studyt, drafted in November 2016, determined the construction of 17 new schools, of which 10 are 9-year schools and 7 are secondary schools.
| Lot 1 | Lot 2 | Lot 3 | Lot 4 | |
| Number of schools | 5 schools have been built | 4 schools have not been built | 4 schools have not been built | 4 schools have been built |
| Schools and locations |
9-year school "Vaçe Zela" Administrative Unit 9 |
3 schools in the Kashar Unit (Yzberisht) | 2 schools in Administrative Unit 2 | 9-year school "Bashkim Fino"
Administrative Unit 2 |
| High school "Kristo Frashëri"
Administrative Unit 9 |
1 school in Administrative Unit 7 | 1 school in Administrative Unit 5 | 9-year school "Kiço Blushi"
Administrative Unit 8 |
|
| 9-year school "Andrea Stefani"
Administrative Unit 11 |
1 school in the Administrative Unit, Farka | "Sevasti Qiriazi" secondary school
Administrative Unit 8 |
||
| 9-year school "Mother Teresa"
Administrative Unit 11 |
"Luan Hajdaraga" secondary school
Administrative Unit, Dajt |
|||
| John F. Kennedy High School
Administrative Unit 11 |
After 8 years, only 9 of them have been built, 5 9-year schools and 4 high schools, according to official information from the Municipality of Tirana. Medium-term draft budget, 2023-2025, also repeats the promise of 2016, using the word "next" for the construction of the remaining 8 schools.
Until September 2023, according to official data from the Municipality of Tirana, 5.4 billion ALL have been collected from this tax.
ACQJ processed the data of two concession contracts for the improvement of the educational infrastructure in the Municipality of Tirana, for tear 1 and 4. 1 schools were built in lot 5, while 4 were built in lot 4. The construction of these 9 schools cost about ALL 4.9 billion including VAT.
This amount constitutes 92% of the revenues collected until September 2023. The construction of a school has cost an average of 520-570 million Lek (€5-5.4 million), including VAT
| Construction costs of concession/public-private partnership schools (lek) | |||||||
|
|
Number of schools | Value invested by the concessionaire (without VAT) | Value invested by the concessionaire for maintenance Services (without VAT) | Profit margin (6.28% on residual value of direct investment and maintenance cost) | Total payment to the concessionaire (without VAT) | Total payment to the concessionaire (with VAT) | Average cost for a school |
| Lot 1 PPP | 5 | 1,600,861,766 | 339,760,304 | 423,473,957 | 2,364,096,027 | 2,836,915,232 | 567,383,046 |
| Lot 4 PPP | 4 | 1,176,113,096 | 251,132,420 | 311,210,726 | 1,738,456,242 | 2,086,147,490 | 521,536,873 |
| Total | 9 | 4,102,552,269 | 4,923,062,723 | ||||
Source: Contracts of Lot 1 and Lot 4
Note: *The contract of lot 1 is without VAT. The value with VAT has been calculated by the editors
A construction engineer, under conditions of anonymity, interpreted for ACQJ the above cost.
"With the average cost of building a school, according to these 2 contracts tendered by the Municipality of Tirana, 2 to 3 such could have been built".
As 8 more schools remain unbuilt, the municipality extended the application of the tax until 2025, planning to collect 2.4 billion lek, but even with this extension of the application of the tax, the money, which is expected to be collected by the end of this year term, are not enough for the construction of 8 other schools. With that money, less than 5 schools can be built, if we refer to the budget spent for the construction of the first 9 schools (520-570 million ALL per school).
Temporary education infrastructure levy continues
The tax was initially predicted to last 7 years (2016-2022), but in December 2022 the Municipal Council decided to continue the temporary taxation, defining this time a 3-year term (2023-2025).
The law expert, Prof. Dr. Migena Leskoviku emphasizes: "According to Law no. 68/2017 on Local Self-Government Finances, a tax, which is temporary, cannot be applied for more than 3 years. The 7-year term has expired in 2022 and in the meantime its application has been postponed for another 3 years, but this tax is temporary and the law does not foresee cases when this term can be postponed."
| Quick | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023
(9 months) |
| Amount (in Lek) |
495,950,390 |
681,927,166
|
730,095,161
|
699,773,149
|
649,392,794
|
756,967,278
|
759,519,645
|
598,248,585
|
| Quick | 2023 | 2024 | 2025 |
| Estimated amount (in ALL) |
747,727,133
|
926,500,000
|
971,850,000
|
The tax will be collected until 2025, a full decade of its application. In the next 1 years, the cost of the tax for the citizens of Tirana will increase due to the increase in the reference price of apartments. The value, which is expected to be collected in 10 years, according to The medium-term budget project, 2024-2026, of the Municipality of Tiranas, is expected to be ALL 7.4 billion (€71.4 million).
The economy expert, Dr. Rezart Prifti, shows what education tax means for finances.
"In America named taxes, i.e. taxes to which a name has been assigned, for example an education tax, are called earmarked budget. The income derived from it must go to the extent of 100% of what has been determined. The destination of the income collected from the education tax is not known and how much of it was actually used for education", he reasons.
Questions about the school building formula (SPP)
"Given that the capital needed to be invested in this direction is quite large compared to the current opportunities of the Municipality of Tirana, financing alternatives such as PPP should be evaluated as an opportunity to solve some urgent problems", - it was written in the study of the feasibility of the Municipality of Tirana in 2016.
This argument could have been valid if the construction of schools had started immediately and simultaneously in all 4 lots. The works started on May 20, 2019, a year when the municipality had been applying the tax for over 3 years and had collected about 2.6 billion lek (€25 million).
The feasibility study determined the method of payment and the form of the contract. The contract, of sorts Concession Public-Private Partnership (PBOTM), required the company to design, finance, construct, furnish, maintain, supervise and approve educational facilities. The contract lasted 7 years and 18 months. 18 months was the time for building schools. The other part, 7 years, started on the date of delivery of the schools and charged the concessionaire for their maintenance. During these 7 years, the concessionaire would be liquidated by the municipality for the full value of the investment, with a profit margin of 6.28% per year.
"For public works, unlike private investments, the profit rate tends to be a social rate (about 3%), i.e. lower, and not a market rate, as in this case (6.28%), as they serve generations and their repayment extends over a longer period of time", explains the economic expert, Prof. Assoc. Dr. Hello Pocket.
4 concessions were announced in 2017, but a year later the contract was concluded only for tear 1. The concessionaire company ZMA, consisting of companies: AGI CONS s.pk, MET ENGINEERING s.pk, ZENIT&CO Ltd., built 5 schools. According to the contract specifications, the value of the investment was ALL 1.6 billion without VAT. The value invested by the concessionaire for maintenance Services was 339 million ALL and 423 million ALL was the profit margin (6.28% on the residual value of direct investment and maintenance cost). Total value, 2.83 billion ALL with VAT. The average cost of building a school in lot 1 turns out to be 567 million ALL.
2 years later, the procedure for tear 4, which was entrusted to the concessionaire company, consisting of the following companies: Alba Construction s.pk, Field s.pk, Ed Construction s.pk, A&E Engineering s.pk, Son Engineering and Construction s.pk, Erzen Ltd. 4 schools were built on this lot. According to the contract specifications, the investment value was 1.17 billion ALL without VAT, the value invested by the concessionaire for maintenance Services was 251 million ALL and 311 million ALL was the profit margin (6.28% over the residual value of the direct investment and the cost of maintenance ). The total value is 2.1 billion ALL with VAT.
| Reports | Already collected in 2016-2023 (3 quarters) | Estimated for the years 2016-2025 (in total) |
| Temporary Tax for Educational Infrastructure | 5,371,874,168 ALL | 7,419,702,716 ALL |
| PPP cost for Lot 1 (investment+interest), with which 5 schools were built | 2,836,915,232 ALL | 2,836,915,232 ALL |
| PPP cost for Lot 2 (investment+interest), with which 4 schools were built | 2,086,147,490 ALL | 2,086,147,490 ALL |
| The cost of 2 PPP in total, with which 9 schools were built | 4,923,062,723 ALL | 4,923,062,723 ALL |
| The remaining value, with which 8 schools are supposed to be built | 448,811,445 ALL | 2,496,639,993 ALL |
The Municipality did not argue the postponement of the application of the tax until 2025, but the data shows that the income from it is insufficient for the construction of 8 other schools, according to the "salty" method used by the Municipality of Tirana for the construction of 9 first schools.
"The municipality of Tirana, in terms of this tax, is not in order with the timing and feasibility, as well as violated political promises, ethics and, in the last word, violated the law. He violated the law, because he received a budget, which he had targeted for a certain area and spent it for who knows what", - concludes his reasoning, the expert of the economy, Dr. Rezart Prifti.
In December 2023, the Secretary General of the Freedom Party and member of the Municipal Council of Tirana, Tedi Blushi, HIS The High State Control launched an in-depth audit in the Municipality of Tirana, in the Directorate of Local Taxes and Fees, as well as in the General Directorate of Financial Management on the way of managing the income from the temporary tax for the educational infrastructure. Until the moment of publication of this article, he has not received any response from the SSC.
The story begins, but does not end with Tirana
The temporary tax for educational infrastructure, after Tirana, also attracted 5 other municipalities. The municipalities of Kamëz, Kavajë, Berat, Dimal and Gramsh applied a tax or fee for education, but with different time limits and definitions of costs and subjects obliged to pay it.
Lawyer, Prof. Dr., Migena Leskoviku, points out that, by collecting these revenues as a "fee" and not as a "tax", the municipalities avoid some detailed procedures, which Law No. 68/2017, "On the Finances of Local Self-Government", in the case of the imposition of temporary taxes.
In response to requests for information, the municipalities clarified that the income provided by the education tax was mainly used to make purchases, to pay off obligations (energy, water) and for maintenance Services. They have not built any educational facility with them, since the amount collected has been described as "modest", "negligible" and "insufficient" by the municipalities themselves in their official responses.
the other 5 municipalities
- Kamez municipality
| Screws | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Shuma
(in Lek) |
14,744,874 | 14,486,378 | 16,313,568 | 12,578,882 | 17,412,586 | 16,520,495 |
Kamez Municipality: "This fund was used for Services and for the maintenance of educational facilities."
- Municipality of Kavaja
| Screws | 2017
|
2018 | 2019 | 2020 | 2021 | 2022 | 2023 |
| Shuma
(in Lek) |
2,040,000 | 2,438,316 | 2,634,503 | 3,368,000 | 4,275,098 | 6,504,300 | 4,468,363 |
Municipality of Kavaja: "Income from the education fee is almost negligible.
This fund has been joined with the funds delegated by the relevant ministry for the complete liquidation of some budget items, such as:
1-Purchase of materials for dormitory and school maintenance
2-Repair and purchase of kitchen utensils
3-Materials for cleaning
4-Energy+water Services
5-Maintenance of boilers and hydraulic systems."
- Municipality of Berat
| Screws | 2020 | 2021 | 2022 | 2023 (11 months) |
| Amount (in Lek) | 6,743,000 | 9,339,000 | 8,452,000 | 8,005,000 |
Municipality of Berat: "Budget items, which have spent the education tax:
1-Maintenance Services (hydraulic materials, carpentry, building materials, painting, electrical)
2-Boiler maintenance Services
3-Purchase of cleaning materials for educational institutions
4-Liquidation of energy and water contracts of educational institutions
5-Purchase of equipment (household appliances, stoves, wooden chairs for gardens, nurseries)"
- Municipality of Dimal
| Screws | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
| Amount (in Lek) | 388,550 | 3,537,139 | 3,028,799 | 3,624,731 | 3,945,353 | 4,002,179 | 3,516,701 |
Municipality of Dimal: "The educational fee is a modest amount, which in annual income is equal to the cost of water and electricity bills in all educational institutions in the territory of the Municipality of Dimal. As much as the education fee, collected for one year, is also the municipality's expenditure, which goes to salaries (sanitaries and guards in educational institutions)."
- Municipality of Gramsh
| Screws | 2020 | 2021 | 2022 |
| Amount (in Lek) | 883,409 | 1,176,818 | `1,492,332 |
The municipality of Gramsci: "The revenues that were collected were insufficient to cover all mandatory expenses, as well as to make the necessary investments, whether new or reconstructions".
For the law expert, Prof. Dr. Migena Leskoviku, the concern is the lack of identification of specific investments by local government units related to the income collected from the tax and thus uncertainties are created about the way of managing the tax or the fee for the educational infrastructure.
"Even though the temporary, educational tax in the Municipality of Tirana and in other municipalities has brought additional investments in recent years, the lack of transparency makes them difficult to measure. The issue of lack of transparency also leads to the problem of public consultations as legal obligations, established by Albanian legislation for local government units in Albania", she concludes.
Tirana, today
"In Astir, there was neither a 9-year school nor a high school. I don't know how the situation is now", - says 22-year-old Orjada, once a resident of Astir, who does not know that unfortunately the situation has remained the same, as she left it 4 years ago, when she left to pursue higher studies outside the Albanian territory.
In Astir, no school was built by the Municipality of Tirana, despite the plans, and the same story has also followed the area of Farka, Sauk and Lake Dry, which are waiting in line for the lucky PPP. It will really cost billions of lek, but it will save 30 minutes or more of a bus ride to access public education.
This article is part of the Investigative Journalism Laboratory project, which is financially supported by the Public Relations Office of the US Embassy in Tirana. The opinions, findings, conclusions, and recommendations expressed are those of the author(s) and do not necessarily represent those of the Department of State.
