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The slowdown in construction permits shrinks the total revenue of the Municipality of Tirana by 41% for the first five months of 2025

2025-07-01 07:39:00, Ekonomi CNA

The slowdown in construction permits shrinks the total revenue of the

Tirana Municipality's revenues have marked a significant contraction in the first 5 months of this year, reflecting the capital's high dependence on the issuance of construction permits.

According to the Tirana Municipality's budget execution report for the period January-May 2025, total revenues from taxes and fees were 7.4 billion lek, or about 75 million euros. Compared to the same period a year ago, when they were 12.5 billion lek, revenues have decreased by 41.5%.

The main impact on this performance was the infrastructure impact tax, which the Municipality collects from the issuance of building permits and which is 8% of the value of residential construction. This item has brought to the budget only 1.3 billion lek, from 6.3 billion lek in the same period a year ago, with a contraction of almost 80%.

The infrastructure impact tax contributed to 18% of revenue in January-May 2025, down from 50% in the first five months of 2024.

The decline in this item is in line with the contraction of the area of ??construction permits. Other INSTAT data revealed that in the capital in the period January-March 72 construction permits were granted, with an area of ??about 201 thousand square meters. Compared to the same period a year ago, the area has decreased by 13.3%. Together with the first quarter of 2023, these are the lowest levels that have been granted since 2018.

In recent years, the municipality has significantly increased its dependence on the tax it receives from issuing building permits. In 2024, the area of ??building permits reached a record level of over 1.9 million square meters, while the municipality collected the highest historical level from the infrastructure impact tax of 14.3 billion lek (145 million euros), corresponding to a construction value of 1.8 billion euros.

Revenues from the infrastructure impact tax accounted for about 54% of total tax and non-tax revenues generated for 2024. This dependence has been viewed with concern by local finance experts. This tax, closely linked to construction activity, exposes the municipality to fiscal risk, as any slowdown in the construction sector brings an immediate drop in revenues.

Co-PLAN and the Ministry of Finance reports warn that this excessive dependence creates a lack of long-term financial sustainability and exacerbates inequalities between municipalities, as the vast majority of this tax is collected in Tirana, while other municipalities are left with limited resources for development. The reports recommend diversifying revenue sources and strengthening local autonomy for a more balanced and sustainable financial system.

Revenue from taxes and other fees

The item that brought in the most revenue in the first five months of the year was the real estate tax, with 1.722 billion lek, an increase of 11% on an annual basis. Next is the cleaning fee with 1.45 billion lek, an increase of 10%. The infrastructure impact tax passed for the first time in recent years, as the third largest contributor.

Expenses, personnel increase, investments are affected

For the first 5 months, the Municipality has spent 10 billion lek, with an increase of 7.5% on an annual basis. The Municipality secures funds for expenses from its own revenues, unconditional and conditional transfers it receives from the central budget, reconstruction, and donations.

The largest share of them went to current expenses, of 4.6 billion lek, with an increase of 13% on an annual basis. Personnel expenses were 3.9 billion lek, with an increase of 17% on an annual basis.

Capital expenditures decreased, reaching 1.48 billion lek, a contraction of 20% on an annual basis.

According to the Municipality's report, among the factors that have influenced the failure to realize the funds planned mainly for capital expenditures are mainly related to procurement procedures, the time limits necessary to complete the procedures and to conclude contracts.

The first 5 months of the year always have a low realization of procurements, as during the first two months, referred to the budget implementation instruction or the previous year's account closing instruction, the reconciliations of the previous year's income and expenses are closed, ongoing contracts are transferred to the Treasury system in accordance with the approved budget, the preparation of the realization of the previous year's procurement register and the creation of a new procurement register in accordance with the approved 2025 budget are continued./ Monitor Magazine