Moldova Explains Higher VAT for Farmers and Diesel Excise Hike

The Ministry of Finance Explained the Increase in VAT for Farmers and the Excise Tax on Diesel Fuel

The Ministry of Finance is proposing to raise the preferential VAT rate for agricultural products from 8% to 12%. Finance Minister Victoria Belous believes that this change will allow for a more even distribution of the tax burden between raw material producers and processors.

Victoria Belous. Photo: NewsMaker

Currently, raw materials are taxed at a reduced rate, while finished products are taxed at the standard rate of 20 percent. According to Belous, this creates a disconnect within the production chain and effectively shifts the associated liquidity problems onto processing enterprises.

“When raw materials are taxed at a reduced rate, but finished products are taxed at the standard rate of 20%, the difference in tax rates and the liquidity problem are effectively shifted to the processing sector,” the minister noted in an interview with Logos Press.

She cited grain as an example: it is taxed at a rate of 8%, while flour is taxed at a rate of 20%. A similar situation, she said, exists with a number of other goods, including sugar.

The Ministry of Finance believes that raising the rate by four percentage points will not place a critical burden on farmers. One argument is that the industry has accumulated VAT credits that can be utilized. At the same time, the change should create additional incentives for processing agricultural raw materials domestically.

A separate change concerns diesel fuel. The Ministry of Finance proposes raising the excise tax on it by 20% annually to more quickly align with the European Union’s minimum rates.

Victoria Belous acknowledges that the excise tax increase will raise the tax burden, but she attributes it to the need to boost budget revenues. A significant portion of these funds is allocated to infrastructure.

“No one in Moldova likes the condition of our roads, but everyone likes the condition of roads in Europe. And if we see results, we must understand how they are financed,” the minister emphasized.

According to Belous, the government is striving not to increase the burden on other sources of revenue. Specifically, there are no plans to raise the income tax, the base VAT rate, or social security contributions.

It should be noted that the Ministry of Finance’s proposals are part of the draft tax policy for 2027. The document is currently undergoing public review.