VAT and Liquidity Problems of Businesses in the Region of Shkodra

This paper aims to outline the reasons for the malfunctioning of the VAT refund scheme and identify chain effects that impact business liquidity in the Shkodra region, Albania. The VAT refund is a critical factor significantly affecting business liquidity. The refund process is considered the 'Achilles heel' of VAT, necessitating close attention due to the costs it imposes on businesses and the economy. Through interviews, the main causes of the refund scheme's malfunction were identified. An analysis of the liquidity in the financial statements of businesses with a credit balance over 400,000 ALL in the Shkodra region was conducted to explore the relationship between business liquidity and the malfunction of the refund scheme. This paper may serve as a catalyst for tax authorities to improve the performance of VAT refund deadlines. Future research may focus on trading and import-export businesses to identify which sectors incur greater costs due to refund scheme issues.