VIDEO // Prime Minister about new tax policy, which will bring 5.1 billion lei to budget

The Government today approved the draft law amending certain legislative acts on the simplification of tax and customs legislation, a document that will be submitted to Parliament. Prime Minister Vasile Tofan says the new fiscal policy aims to bring 5.1 billion lei in additional revenue to the state budget, with an emphasis on higher taxation of vices and reducing tax exemptions.

The new fiscal policy aims to generate approximately 5.1 billion lei in additional state budget revenue, of which 2.7 billion lei is expected to come from higher excise duties, particularly on products and activities associated with vices and gambling.



Tofan said that drafting the bill had been a complicated exercise for the current Government, which was invested on July 22 and had very little time to prepare the new fiscal policy.


“I must say that this was a complicated exercise for this Government. We were invested on July 22. From the very beginning, we were in a race against time,” Tofan said during the meeting.


The Prime Minister explained that, from the very first Government meeting, he had requested that the new vision for fiscal policy be presented by August 6, so that there would be enough time for consultations and for the new rules to be applied from January 1.


“Why is this important? Because there is enough time for consultations, so that by January 1, accountants, companies and civil society have time to prepare for this new fiscal policy,” the Prime Minister explained.


In his view, fiscal changes should not be adopted at the last minute, and the business community must know in advance the rules under which it will have to operate.


“We cannot be in a situation where we introduce the fiscal policy just a few weeks before the end of the year and expect people to comply,” Tofan stressed.


According to the Prime Minister, the new version of the fiscal policy is less ambitious in terms of estimated revenue than the draft presented by the previous Government in June.


“We all remember that the first version of the fiscal policy, proposed by the previous Government in June, aimed to bring an additional 6 billion lei to the budget. It was a very, very intense public debate,” Tofan said.


Under the new formula, the target is 5.1 billion lei in additional revenue.


“I believe that this new formula aims to bring 5.1 billion lei to the budget — a little less, but with the necessary priorities,” the Prime Minister said.


One of the main changes in approach is the higher taxation of products and activities considered vices, so that a significant portion of the additional revenue does not come from additional taxation of labor.


“A major source of this broader consensus is the fact that we have set the right priorities. First of all, we are taxing vices more heavily,” Tofan explained.


According to him, 2.7 billion lei of the estimated 5.1 billion lei is expected to be collected through higher excise duties, primarily on vices and gambling.


“The 2.7 billion lei out of the 5.1 billion lei we aim to bring in will come from excise taxation, primarily on vices and gambling,” the Prime Minister said.


Another objective of the bill is to simplify legislation and reduce the number of tax exemptions.

According to Tofan, the current Tax Code contains numerous exemptions that complicate companies’ activities and generate additional costs.


“We are standardizing certain exemptions that make operations far too complicated and costly,” the Prime Minister said.


During discussions following the presentation of the bill, Tofan explained that the Government was trying to limit the number of such exemptions, although he acknowledged that the process could cause dissatisfaction among certain groups.


“We are trying to limit the number of exemptions; I must say this directly. At present, we have a Tax Code full of exemptions, and I believe this is part of the exercise of limiting exemptions,” the head of Government said.


However, the Prime Minister stressed that the bill was not considered final and that changes could be made following parliamentary debates. The head of the Executive noted that the bill could still be improved and called on the business community and civil society to submit concrete proposals.


“I admit that there are still things that can be improved in this bill, and I encourage everyone to come forward with recommendations,” Vasile Tofan said.


He noted that some changes had already been made between the presentation of the first version and the final draft.


“On certain issues, we took action and acted proactively, even without them being flagged, and changed certain things between August 6 and the final draft,” the Prime Minister said.


Among the examples he cited were food products for which a reduced VAT rate is proposed.


“At first, poultry meat and eggs were not included, but there were discussions and it was said that these are basic products that should be subject to a reduced tax rate. So we included them, without them being flagged,” Tofan explained.


The Prime Minister also mentioned hygiene products, where the authorities took into account proposals from civil society.


“There are other things we learned from civil society, such as the tax on hygiene products. I am very grateful to the people who raised the issue, and we made the correction,” he said.


During the discussions, Sergiu Sainciuc, a representative of the National Confederation of Trade Unions of Moldova, welcomed the fact that the new version did not provide for additional taxation of salaries, as had been discussed in connection with the previous version of the fiscal policy.

However, the trade unions raised the issue of the tax regime applicable to trade union and employers’ organizations and requested that certain benefits be maintained.

In response, Vasile Tofan said that the issue should be analyzed during parliamentary debates and reiterated the need to reduce tax exemptions.


“The debate must now move to Parliament, where we must make the necessary corrections,” he said.


Finance Minister Victoria Belous explained that some of the measures included in the bill would also have a significant impact on budget revenues.

One of them is an increase in the personal allowance, a measure that would reduce budget revenues by approximately 800 million lei.

At the same time, raising the annual turnover threshold for applying the tax benefit on reinvested income from 100 million to 200 million lei would have a budgetary impact of more than 300 million lei.

Vasile Tofan acknowledged that, in an ideal scenario, this benefit could be extended even further, but the Government must also take into account the need to ensure budget revenues.


“Ideally, I would like this rate to apply to all companies,” the Prime Minister said.


He argued that large companies in the Republic of Moldova are, in many cases, relatively small compared with the European companies with which they compete. “Large companies in Moldova are dwarfs in the European context and compete with giants,” Tofan said.

At the same time, the Prime Minister said that the Government must find a balance between supporting the business environment and the need to collect budget revenues.


“We also have the real world in which we live, and we need budget revenues,” he said.


Thus, for the time being, the bill maintains the benefit for companies with sales of up to 200 million lei, with the possibility that the threshold will be increased in the future.

The Prime Minister said he wanted the new fiscal policy to be adopted by Parliament by the end of September, so that its provisions could enter into force before October.


“I hope we can nevertheless adopt this policy by the end of September, so that it can enter into force before October,” Vasile Tofan said.


The head of Government stressed that the parliamentary debate must be genuine and that any problems identified in the bill should be corrected.


“If there are things we can fix, we will fix them,” the Prime Minister said.


According to Tofan, the additional revenue is necessary for the state to honor its commitments, including those concerning teachers’ salaries and obligations toward farmers.


“This is a very important exercise so that we can pay our bills, fulfill the salary law we promised, which concerns teachers’ salaries, and cover the debts we owe to farmers,” the Prime Minister said.


He stressed that the Government’s objective was to find a balance between the need to ensure sufficient budget revenues and maintaining the competitiveness of the economy. “Yes, we need a balanced fiscal policy,” Vasile Tofan concluded.

The bill will be examined by Parliament, where, according to the Prime Minister, changes and additions may be made following the debates.