Dear Ministers!
The purpose of this open letter is to highlight the potential economic, fiscal and financial consequences of changing the tax regime for investment gold in the Republic of Moldova, in particular, in view of the possibility of applying a 0% VAT rate to investment gold transactions.
The relevance of this issue is driven by: high inflation and currency uncertainty; growing public interest in savings instruments; the need to harmonize Moldovan tax legislation with EU practices; high dollarization; a significant amount of capital outside the financial system.
Currently, the structure of savings of the population of the Republic of Moldova is as follows: bank deposits – 30-40%, real estate – 35%, cash – 30%, investment gold – 2%, financial investments (shares, bonds) – 1-3%, and savings abroad have a low but stable share. For comparison, in Romania, bank deposits account for 50-60%, investment gold – 10-15%, real estate – 20%, financial instruments (shares, bonds, pension funds) – 10%, and cash – 5-10%. The key difference is that in Romania, the majority of capital operates within the financial system, while in Moldova, a significant part of funds is either held in cash or transferred abroad.
In international practice, investment gold is not considered a consumer good but a form of savings and a financial asset. Investment gold includes: gold bullion with a mint proof of at least 995; gold coins that: are minted by official mints; are legal tender in the issuing country; are sold at a price close to the market value of gold. Jewellery and decorative objects are not considered investment gold and are not covered by this scheme.
The advantages of investment gold are: a price increase of 160-170% over the last five years; a stable long-term trend driven by global monetary factors; high liquidity and independence from local economic cycles. Compared to residential real estate in Moldova, in which our citizens prefer to invest, the following factors stand out: a 100% price increase from 2021 to 2024-2025; a high dependence on local factors (mortgage programs, supply, migration); a low liquidity in the short term. The conclusion in this situation is that, given the limited access to financial instruments, real estate in Moldova effectively functions as a substitute for savings, which creates structural imbalances and reduces capital mobility.
When discussing investment gold, international tax practices should also be taken into account. Under EU Council Directive 2006/112/EC: investment gold is exempt from VAT; transactions with it are treated as transactions in financial instruments. A similar approach is applied in Switzerland, the United Kingdom, the United Arab Emirates and other developed financial jurisdictions.
Referring to the current situation in the Republic of Moldova, it should be noted that the application of VAT to investment gold leads to the following effects: increased costs of legal transactions; reduced accessibility of the instrument for the middle class; transfer of some transactions to the informal sector; outflow of capital to tax neutral jurisdictions; maintenance of a high share of cash savings. As a result, the government fails to achieve its strategic objectives of financial market development and capital retention.
The elimination of VAT on investment gold does not mean a loss of tax revenue, as the following will remain: tax on banks’ and dealers’ profits; personal income tax; VAT on related services (warehousing, logistics, insurance); licensing and regulatory fees.
In this context, three possible scenarios should be considered. Conservative scenario: participation of up to 2% of the population; market size – up to 250 million EUR/year; indirect tax effect of 3-4 million EUR/year. Baseline scenario: 3-4% population participation; active participation of banks and dealers; market size of 500-600 million EUR/year; indirect tax effect of 6-8 million EUR/year. Enhanced growth scenario: 5-6% participation of the population; partial attraction of foreign capital; market size up to EUR 1.4 billion/year; indirect tax effect of EUR 10-15 million/year.
Given this situation, esteemed Ministers, it should be noted as a conclusion that the application of a 0% VAT rate on investment gold: is in line with international and European practices; does not present significant fiscal risks; contributes to reducing dollarization; increases the share of capital in the financial system; increases confidence in government institutions. The introduction of a 0% VAT rate on investment gold, accompanied by appropriate regulation and licensing, represents a real economic opportunity that will have many positive consequences.
I hope that my proposal will be duly considered.
With respect,
Mircea Baciu,
entrepreneur from the Republic of Moldova
