This is stated in a media release by the Forța Fermierilor Grain and Oilseeds Producers Association.
Yesterday, during a meeting of the Minister of Finance with a group of agri-food producers’ associations belonging to the CAPA union, the Ministry’s proposal to change the tax policy was voiced. In particular, the introduction of an across-the-board (along the entire production chain in the food production sector) standard VAT rate.
“Unfortunately, the government is trying to follow the same path for the third time, although it is not yet known to what extent the government and parliament accept the position of the Ministry of Finance. In Moldova’s history, there were two attempts to raise VAT on agricultural products (to the standard rate, LP note), under the Tarlev and Filat governments. But then, at least, farmers were reimbursed for the difference between 8% and 20%. It was a waste of time, money and nerves, after which in both cases the governments recognized their mistake and returned to the reduced rate (VAT on agricultural products – 8%). Now the agricultural sector is largely in this sorry state because many farmers may not be able to withstand the third fiscal experiment,” Forța Fermierilor said.
Moldova is a little Denmark?
The association draws attention to the fact that almost all EU countries have zero or reduced (3-12% VAT rate) on the entire agri-food chain or at least on a group of the most important essential foodstuffs. “Is Moldova richer than EU countries? Maybe we have more agricultural subsidies? The only country that does not have a reduced food quota, and that the finance minister referred to, is Denmark. A very similar country to Moldova,” sadly ironizes Alexandru Slusari, executive director of Forța Fermierilor.
The increase in the VAT rate on agricultural products will largely fall on the shoulders of agricultural producers. “With such a high VAT rate, we cannot hope for an increase in purchase prices for many types of agricultural products, I do not rule out even a decrease in the “demand prices” on the part of processors working to supply food products to the Moldovan domestic market,” says Alexandru Slusari. – Our organization assumes that after the VAT increase in the formula proposed by the Ministry of Finance, we should expect only the expansion of the shadow economy in the agricultural sector, even more rapid bankruptcy of micro, small and medium-sized farmers who will not agree to sell their products “on the black market”, higher prices for many agro-food products for final consumers (VAT is a “consumption tax”, LP note ) and increased budget expenditures for VAT reimbursement to a number of exporters, especially multinational companies. In fact, the high VAT system will only incentivize exporters”.
In the previous few years, both local producers of the agri-food sector and expert groups of donor international projects have repeatedly (and provably) pointed out that the most balanced solution in the context of reforming the VAT system in the process of European integration is the introduction of a unified equilibrium VAT (a single rate in the range of 12-14%) throughout the agri-food chain.
