The current system of local taxes is outdated, no longer meets local public authorities’ expectations and visibly contrasts with the commitments made by the Republic of Moldova to the Council of Europe. This is the conclusion of a sturdy of the revenues collected as local taxes that was produced by economist Veaceslav Ioniță, expert of the Institute for Development and Social Initiatives “Viitorul”. The author noted that the current system cannot serve the purpose of strengthening financial autonomy, IPN reports.

According to Veaceslav Ioniță, the revenues collected as local taxes grew by only 11.8%, from 476 million lei in 2014 to 532 million lei in 2020, while the revenues of the national public budget rose by 50% in the period. The local taxes are not indexed annually and the main payers of local taxes are the business entities, while the local population, which is the main beneficiary of the services provided by the local authorities, almost does not contribute to the formation of the budget.

Veaceslav Ioniță said that in the municipality of Chisinau alone, local taxes grew by 1.4% annually over the last eight years, but this rise does not cover even the official rate of inflation.

All the local taxes represent 2.8% of the local budget costs and each year they decrease as share of the costs of local budgets, keeping the local public authorities dependent on the Ministry of Finance. The local taxes are badly managed. One tax accounts for over 50% of the collected revenues, while the rest are formal taxes. The municipality of Chisinau accumulates over 50% of all the local taxes (350 of 670 million lei). This shows the current system of local taxes is not reliable.

The study “Modernization of the system of local taxes as a basic instrument for increasing local financial autonomy” opens the series of events launched by “Viitorul” Institute and its partners from the Coalition for Decentralization. Working as a national platform of communication and consultation of options of this reform, the Coalition aims to ensure consensus on the priorities of the reform by mobilizing all the local and national players, offering its expertize, visions and experience in this complex process.

The Coalition for Decentralization was launched at the end of June by the Congress of Local Authorities of Moldova, the Institute for Development and Social Initiatives “Viitorul” and Promo-LEX Association.