Constitutional Court Cancels the Amendment on VAT Refund from the Gagauz Budget

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The Moldovan Constitutional Court has ruled that the amendment to the Tax Code on VAT refunds in Gagauzia does not comply with the Basic Law. The decision has been adopted at today’s hearing. The Constitutional Court cancelled the amendments and declared unconstitutional Article 6, paragraph 11 of the Tax Code, which provides for the refund of VAT to economic agents in Gagauzia from the autonomy’s budget. The judges decided that VAT in the autonomy should be refunded as before from the state budget, but not from the autonomy’s one. Thus, special tax conditions for the region are preserved. Two justices delivered dissenting opinions. After the ruling was announced, the Gagauz bashkan, Evghenia Gutul, said that the CC judges had restored faith of the autonomy’s residents in justice and the rule of law. Since November last year, by parliamentary decision, Gagauzia has been obliged to reimburse taxes to the region’s economic agents from the local budget, and not from the republican budget, as it used to be. The authors of the law, PAS MPs, said that the legislative initiative was aimed at ensuring the observance of the principle of budgetary fairness between the country’s localities. The project was criticized both by the autonomy’s bashkan and deputies of the People’s Assembly of Gagauzia. Deputies of the People’s Assembly of Gagauzia (PAG) and the Party of Socialists of Moldova (PSRM) filed a petition to the Constitutional Court demanding that the law changing the tax policy towards Gagauzia be declared unconstitutional. The PAG stated that the amendments to the Tax Code will result in the loss of up to 100 million lei annually due to the need to refund VAT to local enterprises at the expense of the local budget.