Hasty Reform: How Moldova Decided to Legalize the Shadow Capital

At the end of the spring-summer session of the Moldovan Parliament, the ruling party of democrats passed a scandalous package of tax reform laws through the legislature. As a sign of protest, opposition factions left the parliament session. The reform was criticized by representatives of the European Union, the United States, as well as the IMF and the World Bank. In just three days the party of democrats managed to present and approve the tax reform of Moldova, consisting of three bills. These plans of the authorities became known on Tuesday, July 24. The next day the bills were registered in the parliament, they received a positive assessment from the government and the corresponding parliamentary commission. However, according to the communist deputy Oleg Reidman, the legislators did not get acquainted with the text of the bills: “We listened to the law on the so-called reform according to oral information provided by the Chairman”. On Thursday, July 26, a package of bills of the tax reform was adopted at a time in two readings. First, it provides for the introduction of a single income tax of 12% and a reduction in VAT for the restaurant and hotel business from 20% to 10%. Secondly, the decriminalization of economic crimes. And, finally, the tax reform allows to legalize assets for 3% of the amount of their value. The package of bills was adopted only in the presence of the deputies of the parliamentary majority. Opposition factions in full left the chamber in protest. The head of the PSRM faction in the parliament, Inna Shupak, said that even the chairman of the parliament, democrat Andrian Candu, does not observe the regulations of the legislative body. Inna Shupak: “The PSRM members, preparing for the parliament meeting, tried to find bills for so-called tax policy reforms. The day before, at 23:00 this package of reforms has not yet been posted on the website of the Moldovan parliament. How can we talk about the democratic process, if we, MPs, cannot get access to bills that are seen as vital for the development of Moldova”. The Liberal Democrats also believe that the tax reform was adopted in a hurry. “During this parliamentary session we had no meetings for months, we held one or two a month, and now we have more than 50 bills on the agenda. This is done so that they can cover tracks,” said the head of the LDPM faction Tudor Deliu, criticizing the tax reform itself. Tudor Deliu: “It is more reasonable to talk about the legalization of theft, and not the legalization of capital. Those who used to say that their castles and luxury cars were donated by their grandmothers will now be able to legalize their property by paying a minimal percentage of its value. This is pure charlatanism”. However, the Speaker of the Parliament Candu, speaking from the central rostrum, assured that the lawmakers had all foreseen. Andrian Candu: “We want to bring those 40% of all that is called the shadow economy – the WB, the IMF and others told us time and again that this is a shadow economy – we want to bring it to legal track, so we proposed declaring their incomes. You remember, about a year ago, when we took the initiative to declare property, they said that we wanted to launder money. Now the law clearly spells out who cannot use it. I have already seen some comments from the so-called professional civil society – they say that the parliament votes for the law, with which it wants to launder a billion. You, professionals, open the law and read who will not be able to use it”. Chairwoman of the Socialist Party Zinaida Greceanii, however, believes that the law on the legalization of capital contains convenient loopholes. Zinaida Greceanii: “Even if the authors of the law noted that it cannot be used by governmental officials, prosecutors, deputies, etc., they did not say what about their relatives, their proxies, prosecutors, judges? Descendants in what generation cannot use the law? Probably, this is a loophole – you yourself understand why”. The faction of the liberal party also drew attention to this gap in the law. Deputy Alina Zotea declared in blunt terms: “Moldova is a country where the capital stock is registered with relatives and their proxies”. However, Speaker Andrian Candu did not see anything surprising in the criticism by the opposition: “The parliamentary and extra-parliamentary opposition resists absolutely everything that the parliamentary majority does”. Andrian Candu: “Today the opposition is against the law, which will benefit absolutely every citizen of the Republic of Moldova. For the first time in many years, taxes are being cut so that citizens receive more income each month. Why is the opposition so opposed to this? Why did they escape from the chamber? Because they did not have any arguments”. It is noteworthy, however, that not only the Moldovan opposition took the critical stance this time. The US embassy responded to the vote in the Moldovan parliament on the same day, it was “gravely disappointed” by the adoption of the bill on amnesty. “We believe that this law runs contrary to commitments the Government of Moldova has made [...]. The Moldova people have already suffered the major consequences of financial crimes. Criminals should be punished, not rewarded,” the diplomatic mission said on its Facebook page. The head of the EU delegation to Moldova, Peter Michalko, expressed the hope that the Moldovan authorities would stop the process of adoption of this legislation. “The Republic of Moldova has taken upon itself commitments with regard to the EU […]. The legislation adopted in a hasty and non-transparent manner, if applied, might lead to a breach of these commitments and be inconsistent with the on-going reforms [...],” the European diplomat responded. The International Monetary Fund criticized the tax reform of the Democratic Party of Moldova. According to the IMF, “the measures taken will exacerbate the regressivity of the tax system and may lead to a weakening of the tax discipline”. The World Bank noted that the actions of the authorities undermine the Moldovan Government’s commitment to fighting corruption and could have a negative impact on tax compliance. “The package is inconsistent with the policy reform program supported by the World Bank Group,” the communiqué says. Meanwhile, at the close of the spring-summer session, the ruling majority approved the date of the parliamentary elections. They will be held on 24 February. The mandate of the current legislative body expires on November 30, 2018. Source: RFI