Moldovan government gives positive notification to cutting income tax, increase in personal exemption

Chisinau, 25 July /MOLDPRES/ - The cabinet, at a today’s meeting, gave a positive notification to a legislative package on fiscal reform. The package provides for stimulating the business environment, increasing residents’ incomes, reducing the shadow economy, envelope salaries, tax evasion and undeclared incomes, the government’s communication and protocol department has reported.  

Thus, the cabinet’s goal is to combat the envelope salaries phenomenon, which presently has two effects: low pensions (as no contribution is made to the pension system) and poorer incomes to the state budget, collected in form of taxes. To reduce the envelope salaries phenomenon, the government proposes:    

- cutting the income tax for private persons from 18 per cent to 12 per cent, through setting a single quota;

- cutting the employer’s contribution to the State Social Insurances Budget from 23 per cent to 18 per cent (regards exclusively the corporate sector);

- doubling the personal exemption from 11,280 lei to 24,000 lei. For the first time ever, those who receive salaries under the subsistence minimum (1,862.4 lei in 2017) will no longer pay taxes.  

Also, to eliminate tax evasion by economic agents from the HORECA services and taxi services, the following is proposed:  

- for the HORECA industry – cutting the quota of the value added tax (VAT) from 20 per cent to 10 per cent for the services from restaurants, hotels, coffee houses, catering, etc.

- as for the taxi drivers’ services, the cabinet proposes a special regime of taxing employees with salaries lower than 10,000 lei per month with the imposing of an income tax of 500 lei monthly. At the same time, fines increase for the activity without licence and the passenger can refuse the payment of the travel, if he/she does not get a payment bill.

To bring money from the shadow economy to the real one, the government ruled that the private persons can voluntarily declare the undeclared assets; these persons will have to show the source of the income and pay a three-per cent tax of the value of the assets liberalized till 10 December 2018. The cabinet specified that the following categories of people will not be able to benefit from voluntary declaration of assets: civil servants, those who held public officers after 2009: presidents, MPs, prime ministers, ministers, judges, prosecutors, directors and deputy directors of the Intelligence and Security Service, National Anticorruption Centre, State Fiscal Service, Customs Service, National Bank of Moldova, National Energy Regulatory Agency, National Agency for Regulation in Electronic Communications and Information Technology, the Service for the Prevention and Combating of Money Laundering, etc., as well as heads of the embezzled banks and those who benefited from fraudulent loans, including from the banks Investprivatbank, Banca de Economii (Savings Bank), Banca Socială (Social Bank) and Unibank. In this way, the government, following discussions with foreign partners, has the goal to make sure that no fraudulent money or money coming from the one billion theft or other lawless actions will enter Moldova.       

The legislative package approved by the cabinet today also provides for a string of measures aimed at reducing pressure and at stimulating the business environment, among which: extension from 2 to 3 years of the deadline for the repatriation of currency for the results of external contracts; the control on the spot will be made only after the checking of acts; limiting the powers of the Intelligence and Security Service related to the investigation of economic offences and cancelation of fines and delay penalties, if the taxes are paid till 10 December 2018.  

The prime minister said that this legislative package was complex, welcomed by the business environment; Pavel Filip thanked the government and parliament colleagues who had worked to elaborate it. The PM noted that, according to a study, the state budget fails to get about 3.5 billion lei because of the payment of  envelope salaries and the implementation of the legislative package would help remove this phenomenon.   

”Through the development of the business environment, investments, creation of jobs, we can solve also all other problems people are talking every day: salaries, pensions, not leaving abroad, developing roads’ infrastructure, providing quality medical and education services. To settle all these problems, one must have financial capacity. Financial capacity means a good economic development of Moldova,” Pavel Filip stressed.   

The PM demanded that the Finance Ministry makes sure that the fiscal reform is implemented attentively. The legislative package approved by the government today is to be considered and passed by the parliament and is to enter into force as of 1 October 2018.