A proposed mobile bill payment architecture and business solution based

on the new fiscalization process in Albania

ELIRA HOXHA, GJERGJI MULLA, KRESHNIK VUKATANA

Department of Statistics and Applied Informatics

University of Tirana

Nënë Tereza Square, 4

ALBANIA

Abstract: Albania has introduced a new tax reform named fiscalization in 2020. The focus of the process is to

report the transactions electronically and in real-time to the tax authorities’ information systems. The intention is

to reduce informality and bureaucracy, two of the key issues in doing business within the country. Considering that

the new fiscalization process has a clear aim and stable requirements, the waterfall method is adopted to conduct

the research. Beginning with a detailed literature analysis on similar implemented systems, and subsequently

proposing a business solution followed by designing a suitable architecture. The proposed business logic solution

and system architecture have as focal points mobility and interoperability. The interoperability approach enables

the financial institutions’ information system to be connected to the proposed system, implying an increased

potential number of merchants using it. The use of mobile technologies and the possibility to integrate different

digital payment methods increase the number of people taking part in the formal financial system.

Key-Words: fiscalization, mobile, digital payments, interoperability.

Received: June 16, 2021. Revised: April 23, 2022. Accepted: May 18, 2022. Published: June 6, 2022.

1 Introduction

Fiscalization is a set of measures used to reduce tax

evasion in cash and cash transactions. The best way to

achieve this is to report all the transactions (invoices)

in real-time to the tax authorities. In Albania, from the

year 2020, this way of reporting should be the stan-

dard way [1]. Fiscalization as a process focuses more

on those who do not declare and do not pay their obli-

gations in accordance with the law. The new finan-

cial reporting process should ensure better control and

more efficient tax inspection, intending to reduce the

Value Added Tax (VAT) gap. This is not possible only

by using incentive approaches with taxpayers that are

willing to be involved in the process. Therefore, a

standard electronic model should be introduced for all

the stakeholders to exchange the needed data for pay-

ing the invoices and declaring the taxes automatically.

This standard way of sending and receiving informa-

tion between different systems of different organiza-

tions is expected to be embraced and used by many

states by 2025 [2].

Using the fiscalization process through information

systems, with real-time and electronic data can help

in reducing informality and bureaucracy. The infor-

mal economy in the country is among the biggest in

the region. It is estimated to reach 50% of the Gross

Domestic Product (GDP) [3]. It is a fact that exists

a widespread informality, with a significant adverse

impact on tax revenues, and not only, but it also af-

fects negatively economic growth and competitive-

ness. Administrative efficiency is another factor that

helps in business facilitation. Figure 1 shows a cor-

relation between hours spent in bureaucracy and tax

payment. The good practices from OECD countries

show that electronic simplified tax systems reduce ad-

ministrative and compliance costs.

An electronic invoice system can be implemented in

different technology approaches and can be an inte-

gral part of the state strategies and policies for reduc-

ing cash payments and avoiding the informal econ-

omy. Enhancing this system through mobile bill pay-

ment methods brings added benefits such as mobil-

ity and interoperability facilities. Furthermore, it is

seen that cash usage diminishes the productivity of

small and medium enterprises when it is used to carry

out most of the business transactions [6]. Using digi-

tal payments instead also decreases operational costs,

raises profits, and promotes productivity [7]. This

method leads to cheaper and more secure business

transactions [8]. Applying mobile technologies to ex-

ecute these transactions, makes it easier to access the

marketplace and the money, without being obliged to

reach bank branches or suppliers’sites physically. Ac-

cessing the money remotely helps also to reduce the

risk of cash theft [9]. The big picture behind mobil-

ity is to store all the customer financial information

in the smartphone and then through one of the lat-

est access control techniques such as passwords, fin-

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Hours Spent* % of Tax Payment**

Albania

Central Europe and Central Azia

OECD

Figure 1: Administrative Efficiency in Paying Taxes [4][5].

*Each unit corresponds to 10 hours spent for paying

taxes per year.

*Each unit corresponds to % of tax payment .

gerprints, or facial recognition, the payment can be

authorized, and the purchase is completed. Another

advantage that comes from this technological solu-

tion and goes in the direction of cutting the informal

economy is the improved transparency and reduced

document-related fraud, because every transaction in

a digital financial payment system, can be recorded

and traced.

As mentioned in the G20 digitization and informality

policy guide [10], individuals and firms can receive

help from the digitization process to address barriers

such as eligibility and affordability to formal inclu-

sion, through easier identity verification, digital pay-

ments promotion, and information environment im-

provement. Digitization is defined as the application

of digital technologies. It helps in the direction of

avoiding informality by using mobile money and dig-

ital payments, which results in including more people

in the formal financial system [11]. Anyhow, avoid-

ing informality is not easy at all. A lot of efforts and

policy actions should still be taken in the direction

of taxes, institutional development, and employment

regulations.

An adequate fiscalization system like the one pro-

posed by the government leads to [12]:

• Reducing taxes. By ensuring that more individ-

uals who are currently operating illegally, with-

out declaring and paying their dues, will now be

obliged to make the payments. The formalization

of the economy expands the circle of taxpayers,

forecasting real chances for tax cuts.

• Identifying irregularities. The technical specifi-

cations of the new system will give to the citizens

the opportunity to verify whether the invoice, for

the goods or services he has paid, has been re-

ported to the tax system. With a few simple steps,

starting by scanning the unique invoice parame-

ters, they will be able to verify if it has been re-

ported to the tax system. This will give to the

taxpayer the opportunity to exercise his rights as

a citizen, and report when someone issues an ir-

regular bill.

• Approaching EU membership legislation. By us-

ing an electronic invoice in line with EU norms,

will bring the country’s legislation closer to the

EU legislation.

• Avoiding non-payers. The new electronic in-

voice system is easier to track payments and find

companies that generate insolvency, by not pay-

ing bills in the mandatory period.

Other countries in the region are undertaking efforts

toward the online fiscalization approach. In Greece

from the beginning of 2021 is introduced ”my Digital

Accounting and Tax Application”, an electronic plat-

form where the transactions and the income/expenses

of the companies are transmitted and recorded [13].

Serbia has implemented the Fiscalization Act in Jan-

uary of 2022, which introduces the use of electronic

fiscal devices [14]. As new features, the taxpayers

will have to use a security mechanism to sign fiscal

receipts and verify their identity when exchanging in-

formation with the Tax Administration. The fiscal re-

ceipts will contain a QR code, which the customer can

scan and check whether their fiscal receipt has been

issued in accordance with the Act. North Macedonia

has stated in its tax system reform strategy that one

of its priorities will be green taxation, which includes

the e-invoice system [15].

2 The Proposed business solution and

system architecture

Considering the issues related to tax payment men-

tioned in the introduction section, they could be dras-

tically improved by the proposed solution that enables

the payment of the fiscal invoices through mobile ap-

plications and by processing the financial transactions

in real-time. The proposed business solution, with its

respective system architecture design, is concepted by

keeping in mind mobility and interoperability. To bet-

ter understand the proposed architecture, it will be ex-

plained how the fiscalization process works through

an activity diagram.

Figure 2 shows the invoice fiscalization process and

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Figure 2: Invoice Fiscalization Process

the communication flow of data that is required be-

tween the tax authority system and the authorized so-

lution providers. The steps that should be followed

for completing the fiscalization process related to a

given invoice are [16]:

• The taxpayer through a third-party application

that is previously certified by the government ac-

creditation bodies, sends the data to the tax au-

thority system in an XML format.

• The tax authority system sends back the con-

firmation of the invoice receipt to the taxpayer,

by including in the response the Unique Invoice

Identification Number (NIVF).

• The taxpayer issues a printed invoice to the client

with the included NIVF.

• A Quick Response (QR) code is generated with

all the information required to process the fiscal-

ized invoice.

The registration and the correct completion of the in-

voice transaction can be verified by scanning the QR

code on the invoice from both, the customer, and the

merchant. The fiscalization process defines a stan-

dard template for QR codes and a protocol for how

to complete it. The latter is the most crucial compo-

nent of the architecture where the business solution is

based.

The business logic of the proposed solution is shown

in figure 3 and it is composed by the following steps:

1. Scan the barcode of the invoice from the client

application (i.e., an e-banking application).

2. Extract from the QR code of the received invoice

the VAT number of the merchant that has issued

the invoice and the total amount.

Figure 3: Business logic

3. Collect the merchant information required to fill

the beneficiary details of the transfer form in step

4, by searching with the VAT number in the main

information system (IS) of the financial institu-

tion.

4. Fill the transfer form with the information gath-

ered from step 3, and the amount of the invoice

that we got from the previews scanning of the in-

voice barcode in step 2.

5. Check the account of the client for sufficient bal-

ance in order to validate the transfer.

6. Ask for confirmation from the merchant before

that the transfer is finally authorized.

To better understand the steps of the business logic, a

practical example is described as follows: The client

Beta buys 5 articles in the supermarket Alpha. After

Beta receives the fiscalized invoice, he opens the mo-

bile app and scans the barcode. The App will get the

VAT ID of the supermarketAlpha and the total amount

of the articles that Beta has bought. The app gets from

the system the E-wallet account of Alpha, the address,

and the commercial name. This data together with the

VAT ID are the required information needed for the

online payment. A fund transfer form is opened and

filled automatically with the Alpha’s and Beta’s data.

Then the application checks if the Beta’s account bal-

ance has sufficient money to pay the invoice amount.

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After the control is passed, Beta presses the ”pay” but-

ton to finalize the transfer.

The proposed architecture is shown in Figure 4. The

Figure 4: The proposed architecture

IS on the left (i.e., a core banking system) is divided

from the e-banking application on the right. One of

the main benefits of this solution is interoperability,

which in our case is the ability to integrate the e-

banking application with different ISs such as core

banking systems, ERP systems, fintech systems, etc.

The challenge to overcome regarding the proposed

solution is to ensure that the financial transactions

must be executed successfully in both systems, the

core banking system, and the e-banking application.

This implies that when a transaction is performed in

the e-banking application, it should be reflected even

in the core banking system.

The mechanism proposed to solve the above chal-

lenge is the two-phase commit protocol (2PC) [17].

2PC is a standardized protocol that ensures the atom-

icity, consistency, isolation, and durability (ACID)

properties of a transaction. It is an atomic commit-

ment protocol for distributed systems.

In the proposed architecture, the 2PC protocol re-

quires a role known as a controller. The controller

is in charge of the management and data synchroniza-

tion between the two servers, the one where the core

information system is hosted and the one where the

e-Banking application is hosted. The controller is as-

signed to the server that starts the transaction. The

2PC protocol is implemented in two stages. In the

first stage, both servers try to write the payment in-

voice transaction data. If one of the servers is not

able to perform this action, it replies to the controller

with an ”Error” message. If no error has occurred dur-

ing the transaction, the server sends to the controller

a ”Success” message. In case the server which has

the controller role does not receive any message from

other participants, it re-sends the request. The second

stage begins after the controller receives a ”Success”

message from the other server. Right after, the con-

troller sends a command to the servers to permanently

commit the transaction that was successfully written

in the first stage. As soon as the transaction is commit-

ted in both servers, the controller is informed that the

commit action is finalized successfully. If one of the

servers does not commit, the controller sends a com-

mand to both servers to roll back the payment invoice

transaction.

Figure 4 shows various ways how to access the e-

banking application. This access can be through a

mobile app, a web application, a smartwatch app, etc.

The proposed protocol for accessing the platform in a

secure way is the Secure HyperText Transfer Protocol

(HTTPS). This protocol ensures a required standard

for secure communication elements such as secure

data in transit, phishing protection, and man-in-the-

middle attacks. The HTTPS is designed to transfer en-

crypted information from the web server application

to the client application. It uses the HTTP protocol

combined with a Secure Socket Layer (SSL), which

is an encryption protocol invoked on a web server ap-

plication that uses HTTPS [18].

From the features defined in the HTTPS protocol, the

ones included in the proposed architecture are data in

transit encryption and website identity authentication

as shown in Figure 5. Encryption of the data in tran-

sit ensures that all the data sent and received from the

server are encrypted. Meanwhile, website authentica-

tion is the security process that allows both merchants

and customers to authenticate their identity to the ver-

ified server, so they can gain access to their personal

accounts.

In Albania, at this moment exists only a mobile bill

payment system provided by a second-level bank

[19], which offers to the customers the possibility to

pay invoices for goods and services only for a limited

number of merchants within the country. The cus-

tomers can scan a QR image created at the merchant’s

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cash desk to make the purchases in real-time.

The main difference between this solution and the one

proposed in this paper is related to the limited num-

ber of branches available for the customers to credit

their accounts and the small number of merchants that

have embraced their solution. The interoperability ap-

proach, proposed in our architecture enables all the

financial institutions present in the country to be con-

nected to the system, implying an increased potential

number of merchants and customers that will use the

system.

Figure 5: HTTPS components used in the proposed architecture

3 Conclusions and future work

Technical specifications needed from the tax author-

ities for the fiscalized invoice system are fulfilled

by the proposed business logic and architecture

shown in this paper. Its implementation will bring

many benefits and expected results. Those can be

summarized in the following concepts.

Taxes - An improved way of taxes collection across

the country, where the principal part is still the VAT.

Using an electronic process from the taxation per-

spective will close faster tax declarations, reclaims,

and the traditional onsite audits will not be needed

in the future. The increased incomes carried out in

other nations are exceptional. Brazil has seen a $58

billion (USD) increment in charge income since the

improvement in invoicing and reporting; Chile and

Mexico diminished the VAT up to 50%; Colombia

found that it seems to be diminished 50% of the

country’s tax evasion by applying this models[2].

For this reason, in Albania, the VAT collection is

forecasted to increase by 10-15%, compared to VAT

incomes with the application of the presented system

framework.

Informality - It will be decreased by following

two primary perspectives: the identification of cash

transactions and the decrease of covered up no-cash

transactions, inferring an improved control of the

fiscal framework. The use of the new fiscalization

framework will improve tax control and online vali-

dation through risk-based strategies, which enables

proof of abusers. In this way, the daily businesses’

activities are not disturbed by the tax administration

agents.

Economy digitalization - The modern fiscalization

system gathers more data from citizens and this

leads to more efficient and complete tax reporting.

It helps the authorities to improve their service

to the taxpayers by using pre-filled documents,

which means fewer errors and a faster tax reporting

process. The digitization of these processes helps

the communication and information exchange with

the government and between businesses. This will

reduce administrative operations.

Mobility - Smartphones and computing technology

has grown at an exponential rate and has affected

the financial industry. Nowadays, more people are

oriented to not use cash and credit cards because of

a wide variety of mobile payments to securely com-

plete their transactions. The proposed architecture

goes in this direction.

Interoperability - The proposed system implements

the latest policies and rules in compliance with

international standards for secure transactions. It is

a robust, flexible, and scalable system incorporating

innovative techniques in payment systems such as

QR codes. It enables fair access to financial transac-

tion channels through the Albania Post cores system

for ATMs, online/offline merchants, etc.

Security - By implementing HTTPS in our solution,

the primary advantage that we apply in the system

architecture is the increased trust of the customers in

using the e-banking platforms to boost the revenues

of the companies that will implement such systems.

Furthermore, to minimize fraud losses and supply

user-controlled transactions, the customer is asked to

confirm the transfer.

The proposed system is planned to be implemented

as part of future work. After that, a protocol will be

defined in order to collect data from the day-to-day

usage of the system. The gathered data will then be

analyzed through statistical models and the findings

will be used to further improve the proposed model.

Acknowledgement

We would like to thank the Helius Systems sh.p.k.

for the support provided for the research project dis-

cussed in this paper.

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