In a country where wages remain some of the lowest in Europe, Albanians today pay more for milk, cheese, and eggs than many of their EU and Balkan neighbors — even surpassing prices in countries with far stronger economies.
According to the latest Eurostat data, dairy prices in Albania reached 131.5% of the EU average in 2024. That’s 31.5% more expensive than the European benchmark. Only Ireland (171.7%), Switzerland (147.2%), and Norway (132%) report higher prices.
How did we get here?
The Domino Effect of a Tax Reform
Back in 2005, Albania’s dairy prices stood at just 88.6% of the EU average. In simpler terms, if a dairy product cost 100 lek in Europe, it would cost just 88.6 lek in Albania.
This affordability began to unravel after 2019, when the government revised the VAT refund scheme. From 2020 onward, the creditable VAT for dairy processors on milk purchases from farmers dropped from 20% to 6%, before being scrapped altogether in 2022.
Without the ability to claim back VAT, dairy processors began absorbing the added tax as a cost — which they promptly passed on to consumers. As a result, dairy prices started to climb, overtaking the EU average by 2020 and accelerating sharply thereafter.
The Regional Comparison: Albania Tops the Balkans — for All the Wrong Reasons
Albania now leads the Balkans in dairy prices, ahead of:
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Greece (130.5%)
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Bulgaria (125.7%)
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Kosovo (98.6% in 2022)
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Montenegro (96.7%)
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North Macedonia (91.2%)
In fact, even wealthier EU states such as Italy (105%) and Austria (102.8%) now report cheaper dairy prices than Albania.
At the bottom of the price list are Slovakia (86%), Poland (89.8%), and North Macedonia, showcasing how proactive policies can offset market pressures.
The North Macedonian Model: A Case Study in Dairy Support
In contrast to Albania’s minimal aid to dairy farmers, North Macedonia employs a two-pronged subsidy system that directly incentivizes production:
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9.7 euro cents per liter of milk delivered
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130 euros per dairy cow, plus a 15% bonus in mountainous areas
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48.7 euros per female calf to support herd regeneration
For a farmer producing 6,000 liters annually, this translates to over 583 euros in subsidies — a significant buffer against production costs.
Meanwhile in Albania, farmers receive just 10,000 lekë (about €95) per cow and some free diesel. These supports, however, are widely considered insufficient to counter rising input costs or improve formalization.
Attempted Fixes: A New VAT Compensation Scheme on the Horizon
In response to mounting pressure and rising prices, the Albanian government has drafted a new bill to reintroduce VAT compensation for farmers — proposing a 10% reimbursement rate. This is part of a broader reform aimed at improving traceability and formalizing the agri-food supply chain.
Currently, around 100,000 farmers in Albania are registered with NIPTs (business IDs), enabling them to sell directly to processors or supermarkets through a self-invoicing system by the buyer.
However, after the scrapping of the refundable VAT scheme in 2022, the cost of raw milk rose, as farmers could no longer pass tax-free inputs to processors. The industry has long argued that this move was a fiscal misstep.
Previously, processors could deduct 20% VAT on purchases — a mechanism that helped offset costs and encouraged formal transactions. When this was reduced to 6% and eventually eliminated, the mismatch between 20% output VAT and 0% input credit created a tax imbalance.
Processors and industry associations have since urged for a harmonized VAT system — proposing a unified rate of 6–9% on both purchases and sales, mirroring practices in neighboring countries. This would reduce administrative burdens, enhance fairness, and prevent tax avoidance.
Subsidies vs. Structure: A Missed Opportunity?
Rather than restoring a functioning VAT credit system, the Albanian government opted to distribute direct subsidies of up to 10,000 lekë per cow. Experts criticized the move as poorly targeted:
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It does not reflect the volume of milk produced
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It fails to encourage formalization
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It doesn’t reduce processor costs
In contrast, regional models like that of North Macedonia tie subsidies directly to output, fostering transparency, competitiveness, and price stability.
Conclusion: A Broken Chain, A Costly Reality
Albania's dairy paradox is a classic example of how fiscal policy, when disconnected from production realities, can backfire. What started as a technical VAT adjustment has ballooned into a nationwide affordability crisis.
With prices now higher than in many EU capitals, Albanian consumers are paying the cost of a broken agricultural support system — one that prioritizes short-term fixes over structural reform.
If the government wishes to reverse this trend, it must reimagine its approach: link subsidies to output, restore tax balance, and reward formalization. Until then, a liter of milk in Tirana may continue to cost more than it does in Vienna.
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| Milk, cheese, egg price index by EU countries, source: Eurostat |