Lupusor: budget deficit should be reduced by expanding tax base

Adrian Lupuszor: “The budget deficit should be reduced by broadening the tax base, not by government spending”

Moldova needs a comprehensive fiscal reform aimed at broadening the tax base while preserving the scope for increasing public spending, especially on wages and investment. The tax base should be broadened by eliminating numerous tax exemptions, especially those resulting from the differentiated VAT rate, and by combating the informal economy.

1 June 2026

Irina Covalenco Reading time: 1 minute

Adrian Lupuszor

Adrian Lupushor, executive director of Expert Grup, an independent think tank, made detailed arguments for such a policy, publishing an article on the need for large-scale fiscal consolidation.

“Broadening the tax base, reducing the VAT deficit (estimated by the IMF at 25-30% of the tax collection potential), gradual formalization of the informal economy and modernization of the State Tax Service are measures capable of generating between 2 and 4 percentage points of GDP of additional revenues over four to five years, according to estimates by external partners,” the article states.

A comparative analysis shows, according to the author, that the fiscal adjustment needed to bring the deficit to a sustainable level (2-3% of GDP in the medium term) should be mainly aimed at increasing revenues. While public spending in Moldova is below the regional average, tax revenues as a percentage of GDP are even lower in relative terms. On average for 2020-2025, the share of public revenues in Moldova’s GDP was only 33.2%, compared to 35.2% in Bulgaria, 36.4% in Lithuania or 40.8% in Bosnia and Herzegovina, the expert notes.