Informality and Challenges of Fason Sector’ Businesses - Economicus

by, Grisilda Miftari

Abstract

The paper aims to study informality, as one of the current problems in Albania. The focus of the paper is in apparel sector, due to the importance it has, in the Albanian economy and as one of the sectors most affected by three aspects of informality picked in this study, as the fully undeclared work, under-declared employees and under-declaring real annual revenue/profit. This study is focused on all apparel companies registered in the NRC, localized in Tirana. This study aims to have a respond on the research question: What are the factors affecting the growth of informality? Primary data were collected through personal face-to-face interviews, with high levels of management (owners, managers, chief financial officer). Tax evasion, considered as the subject of the three aspects mentioned above, based on the theoretical model used, is the dependent variable. The main findings of this study provide answers to research questions, highlighting the factors that encourage informality, as tax rates, the level of penalties, compliance costs, and the size of the company and the educational background of the directors of the company. Limitations of this study are the lack of a full rate of return of responses, only a sector involved in the study, and the study is localized only in Tirana. Informality is a challenge for businesses and the main objectives of the government to fight for, and therefore the value of this study lies in the fact that it serves to stakeholders, government, and businesses. The main implications raised from analysis are important for businesses to raise their awareness for benefits of becoming formal and for government, to design some policy recommendations on formalizing the business community and help on a better business climate