Vasile Tofan
According to the prime minister, the updated strategy will be based on four key areas: reducing the tax burden on labor, stimulating investment, raising taxes and excise taxes on goods and activities associated with harmful habits, and adjusting VAT rates to protect the most vulnerable households.
Lower Taxes, More “Official” Wages
One of the reform’s goals will be to reduce the tax burden on low-income workers and combat the practice of paying wages “under the table.” At the same time, the authorities intend to raise the minimum wage and eliminate mechanisms that facilitate tax evasion, including the practice of using dividends in lieu of wages.
“First and foremost, we must structure the tax system in such a way as to make tax evasion less attractive and ensure that law-abiding citizens have an incentive to pay taxes. If we manage to reduce labor taxes to some extent—and there are many tools available to do so—the primary focus should be on reducing the tax burden on low-income earners. If we fix this mechanism, I am confident we will be able to encourage more employers to pay taxes in good faith, attract more people to the labor market, and reduce the scale of tax evasion. In addition, this tax package should include an increase in the minimum wage, as this will close certain loopholes exploited by employers who officially hire employees at the minimum wage while paying the remainder in cash “under the table,” said Prime Minister Vasile Tofan.
He also noted that many employers pay themselves dividends due to the relatively low tax rate, withdraw these funds in cash, and then use them to pay employees’ salaries.
“This is a well-known practice that is extremely difficult to detect. Even if we filled the entire country with inspectors, that doesn’t mean we’d be able to collect more taxes. We need to build a system in which tax evasion becomes unprofitable, and people are motivated to work honestly and pay their taxes,” Tofan said.
“Not Dubai, but Moldova”
Another focus of the reform will be to encourage companies to reinvest their profits in the Moldovan economy through tax mechanisms that promote local investment.
“We need to encourage businesses to invest their earnings here, rather than transferring them to Romania, Dubai, or other countries. On the one hand, we can appeal to economic patriotism, because that is truly important. But at the same time, we must create a tax system that will motivate companies to invest and reinvest specifically in Moldova. Special attention will be paid to this area,” the prime minister promised.
Tax on Vices
The government also intends to increase taxation on goods and activities associated with harmful habits, particularly tobacco products, alcohol, and gambling. The authorities emphasize that this measure has two objectives: to increase budget revenues and to reduce the consumption of such goods and services.
“There’s a figure I wasn’t aware of before: Moldovans spend about 10 billion lei annually on gambling and lotteries. We would all prefer that this money be spent on books, food, and healthcare, rather than on gambling. Here, the state has not only a fiscal responsibility but also a social one. This is an opportunity to increase budget revenue, but at the same time, it is a tool to curb the spread of this phenomenon. At the same time, taxes cannot be raised excessively, because then players will simply turn to illegal sites that the government does not control, and the problem will remain unresolved. Therefore, a balance must be found: raise taxes, but not so much that people switch to illegal platforms en masse.”
VAT: Attempt Number Two
As for VAT, the authorities state that the new version of the reform will be more balanced than the previous one:
“The last and most sensitive issue concerns VAT. In the second version of the reform, we will approach it more responsibly to protect the most vulnerable households, including with regard to the taxation of food, gas, and electricity. We have listened to the public and believe we will propose a significantly more balanced approach.”
The prime minister expressed hope that a “more balanced” version of the tax reform would be presented in just a few weeks.
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