* Albania could announce IMF loan deal as soon as Tues
* 2014 budget sees deficit at 6.6 pct, growth at 2.1 pct
* Budget to start paying 350 mln dollars in arrears tobusiness
By Benet Koleka
TIRANA, Dec 16 (Reuters) - Albania announced on Monday thatit would raise taxes from January, scrapping a flat 10 percentcorporate and income tax rate, and plans to end tax exemptionsfor foreign oil workers, as its new government wrestles risingdebt.
Prime Minister Edi Rama said last week that the Balkancountry needs a new loan arrangement with the InternationalMonetary Fund as his three-month-old government tries to containa hole in its finances.
IMF officials are now in Albania wrapping up a fortnight oftalks and a government official said a deal on a loan ofprobably around US$400 million could be announced as soon asTuesday. Albania was last under an IMF programme in 2009.
Living up to its election promise to tax more heavily thosewho earned more, the government unveiled plans to raise profittax for bigger businesses to 15 percent from 10 percent and cuttaxes for small businesses.
Finance Minister Shkelqim Cani, outlining the new measuresin a draft of the 2014 budget, said the government also plans tointroduce two rates of personal income tax of 13 and 23 percent,and would end tax exemptions for foreign personnel at oil andgas companies on VAT, excise and personal income tax.
However, he said the government was still discussing theissue of exemptions for oil workers with the IMF and an oilcompany official said oil companies planned to talk to thegovernment.
Several oil companies, including a joint venture betweenRoyal Dutch Shell and Canada's Petromanas <PMI.V, areactive in Albania either drilling for oil or in the case ofBankers Petroleum, exploiting the Patos Marinzaoilfield.
The corporate and income tax increases would come intoeffect on Jan. 1, 2014, the start of the fiscal year. Somebusiness leaders have warned the government that tax rises wouldblunt the Balkan state's competitive edge versus neighbours likeKosovo, Montenegro and Macedonia.
Cani said that this year's budget deficit would be 6.2percent of gross domestic product, much higher than a targeted3.5 percent of GDP, and would rise to 6.6 percent of GDP nextyear.
The economy would grow just 1.3 percent this year but growthshould accelerate to 2.1 percent in 2014, he said.
Cani had described the state of Albania's finances as"critical and grave" when Rama's Socialist Party took over powerthree months ago after beating the Democratic Party of SaliBerisha by a landslide in elections in June.
On Monday he said fixing public finances would take time.
"Overcoming this situation is not a short-term duty.Re-establishing macroeconomic balances require a medium-termprogramme and we should all contribute," Cani said.
According to the draft budget, public debt would be 936billion leks ($9.15 billion), or 69.1 percent of the grossdomestic product, this year and would rise to 74.8 percent ofGDP next year, he said.
The government's aim was to reduce the budget deficit to 3percent of gross domestic product in the medium term and thepublic debt to 60 percent at most, Cani said.
The government had consulted the International Monetary Fundand the World Bank on the 2014 budget and received theirsupport, Cani said.
The World Bank has said it plans to give Albania betweenUS$100 million and US$200 million as part of next year's budget.
Cani, a former central bank governor, said the 2014 budgetaimed to establish economic stability and while public debtwould climb to 74.8 percent of GDP, that would be a peak.
"This will be the stabilisation borderline from which thedebt will come down in all the following years," Cani added.
The 2014 budget would start paying 350 million dollars ofarrears to businesses for public works and unpaid value-addedtax reimbursements, known as the previous government's "hiddendebt" amounting to 5 percent of GDP, Cani said.
