Svetlana Slobodyanu
As explained by its authors, the index combines the level of tax burden with indicators of the quality of governance in the state and the rule of law. On this basis, they identified the jurisdictions where taxpayers suffer the most due to tax increases and inefficiency of public institutions.
In particular, Russia and Venezuela are on the first place of the rating, while Moldova, with a score of 8.8, ranks 11th out of 82 economies included in the study. At the same time, it neighbors with countries with negative tax reputation, such as Belarus, Argentina or Brazil. On the opposite side are ten countries, led by Ireland, labeled as “tax havens” with low pressure on taxpayers and highly efficient institutions.
According to the methodology, Moldova’s performance declines due to high tax burden relative to the size of the economy, low predictability of tax policy and frequent changes in the Tax Code. As well as weak state institutions, corruption and bureaucracy. In addition, there are also factors of modest protection of private property and problems in justice that discourage investment.
The Tax Hell Index has been published annually since 2022, and its scores in the current ranking are based on data reported for 2023, the authors note.
Tax and business climate experts, to whom we turned for comments, are rather skeptical about the rating itself. They doubt its status, reasoning and reliability of its results. There was also not enough information about it on the Internet to judge the methodological rigor of the analysis.
The opinions of our interlocutors did not reveal any principal disagreements, because specialists know the situation in the economy best. No one denies the existence of problems in tax policy and administration, as well as in public administration. More interesting are their comments in terms of presenting a picture that is not black and white, but closer to our realities.
Svetlana Slobodeanu, Doctor of Economics, auditor, international certified accountant:
“It is difficult to judge the rating because we do not know what specific indicators were used and how the calculations were made. Nevertheless, from our experience of rendering services to quite a large number of companies of different sizes and from different industries, as well as from observations of the dynamics of our clients’ activities, unfortunately, we must recognize the sharp deterioration of financial and economic indicators in most of them. Naturally, the tax burden becomes more tangible when profitability indicators decrease.
The government is taking certain measures to support business and reduce the tax burden for certain sectors of the economy or categories of companies on certain taxes. For example, deferral of income tax for small and medium-sized enterprises for 3 years (2023-2025), mechanism of accelerated depreciation of fixed assets, preferential VAT regimes for supplies within the framework of international projects, introduction of many special income tax regimes for different categories of taxpayers, etc.
At the same time, there is a clearly pronounced growth of such taxes as excise taxes (the economic motivation for such dynamics is clear), real estate tax (both by increasing the tax rate by local councils and by increasing the taxable base). Therefore, unfortunately, as the history of business development shows and is noted in works on macroeconomics, an increase in the tax burden does not contribute to economic growth”.
According to Dorin Moldovan, director of Audit exact company, given that we have the entire document flow today in electronic format, including control activities, the tax service responds more quickly to challenges. “That is, the STS has more modern tools,” he says. – Information comes faster, it is more synchronized and streamlined. For this reason, there may be more inspections, but they are initiated on the basis of risks, which is helped by special programs.”
According to Ion Prisekaru, who led the tax service for many years, our position is a consequence of the fact that the tax reform, which was launched in 2016, was never implemented. Despite the fact that a new tax system was already planned, including changes in tax administration. As well as the development of a new information system that would eliminate the meeting between taxpayers and tax inspectors, respectively, reducing the level of corruption.
“All this was envisioned in a $20 million project to be financed by the World Bank,” he says. – The project was approved by parliament and planned for three years, then extended for another three years. We had a hard time getting these funds allocated, but the WB representatives found them for us, because the reform was planned to be radical. It envisioned the development of a new tax system by simplifying it and reducing it through taxes that did not meet their original objectives. Then the plan was to write a new Tax Code and create a new integrated information system.
Ion Prisăcaru recalls that in 2015, based on the results of 2014, the Moldovan tax service was identified by Transparency International as a transparent and taxpayer-friendly structure. “No matter how painful it is to admit it, unfortunately, the current situation is the result of disinterest in the implementation of this project,” the interlocutor continues. – There is no new information system, we use the platform that has been in place since 1998, and there is no tax system either. The Ministry of Finance initiated the development of a new Tax Code several years ago, but it was suspended.
– It is possible not to believe the rating, but it is impossible not to believe the fact that businesses are closing and few new ones are opening, states Ion Prisekaru. – As a result, people are leaving. We had to reconsider the taxation of wages, because this pressure is the heaviest burden, because of which there are evasion, shadow economy and wages. And we are struggling with the trip ticket, without which we can’t write off fuel. That is why enterprises use it anyway.
