Due to the complex procedure for collecting overdue tax debts, in practice these debts remain frozen for long periods. This reduces municipal revenues.
Local government officials see this as a clear contradiction. Although the Ministry of Finance officially acknowledges that arrears owed to local budgets have exceeded 220 million lei over the past five years, the draft’s authors do not provide local authorities with effective tools for enforcing collection.
At the same time, the new Article 197¹ of the Tax Code grants the State Tax Service the right to issue collection orders—which have the force of an enforcement document—directly against the bank accounts of individual debtors.
Local governments, however, are still forced to undergo costly and time-consuming legal proceedings. Local government officials are calling for this out-of-court mechanism to be extended to city halls as well, in order to halt the rise in the number of debtors.
In this context, it is worth noting that one of the reasons for postponing the introduction of the new personal income tax measure—which would have caused local budgets to lose a portion of their revenue—was a series of discussions with representatives of the Congress of Local Authorities of Moldova (CALM).
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