How Market Freedom Is Being Distorted in Kosovo: An Analysis of Tax Administration Interventions in Business Pricing

Abstract

This study examines how tax administration measures may indirectly influence pricing freedom and competitive dynamics in Kosovo, with particular attention to policy and procedural developments visible in 2024. Kosovo’s market economy is expected to rely on supply and demand as the primary mechanism of price formation, yet enforcement design and compliance obligations can affect prices through administrative costs, perceived audit risk, and uncertainty. The research uses qualitative document analysis of publicly available institutional materials and legal texts, complemented by comparative literature on tax compliance burdens, especially for small and medium-sized enterprises (SMEs). Key sources include the 2024 Law No. 08/L-257 on the Administration of Tax Procedures and related institutional communications, alongside international evidence on compliance cost structures. The analysis suggests that rapid expansion of documentation and procedural requirements can impose disproportionate burdens on SMEs, which often have limited capacity to absorb fixed compliance costs. This may translate into more conservative pricing strategies, reduced discounting flexibility, and weaker incentives for innovation and market entry. The study concludes that stronger compliance is a legitimate public policy objective, but implementation should be calibrated to protect competition and minimize unintended market distortions. Policy recommendations emphasize simplification, risk-proportionate enforcement, clearer guidance, and structured consultation with the private sector