Albania - Targeting Foreign Direct Investments To Extractive Industry Through Fiscal Policy

Abstract: Abstract This study aims to study the policies and measures adopted in order to attract FDIs to the extractive industry and to maximize their effects on the Albanian economy. Emphasis is put on fiscal policy and the allocation of tax revenues received from FDIs in the extractive industry. To conduct the study I have used theories explaining the reason behind FDI decisions and the mainstream theories in taxation of extractive industries. The Albanian state was in the beginning of the 20th century establishing itself as an industrial state. A Part of this undertaking was the establishment of a large extractive industry, which was the foundation of the industrial sector. After the events of the 90s the extractive industry regained attention and it is now playing an important role for the development of the Albanian economy. Albania early imposed a royalty of 2 percent in addition to the regular taxation obligations, to attract new investments. This has since then been changed to a new level of 4-10 percent depending on the sector. However, both output and investments remained at a seemingly low level until recent years where there has been a boom in investments, output, research and development activities.