Customs administration and tax administration are among the most pressing problems in the business environment that negatively affect companies’ productivity. A study launched by the World Bank - “Moldova: Policy priorities for private sector development” - highlights key constraints to private sector development in the country, IPN reports, quoting a communiqué from the Economy Ministry.

The analysis identifies five most pressing problems in the business environment that are adversely affecting companies’ productivity and competitiveness. These are: customs administration; tax administration; business regulation, consisting of licenses, authorizations, permits, and inspections; the competition framework; and access to finance.  While progress has been made in these areas over the past several years, and the government has expressed a commitment to reform in relevant areas, there is still much work to be done. The study aims to help the government by identifying priority areas and reform recommendations.

In customs administration the study highlights that the performance of Moldovan companies is adversely affected by delays, unpredictable requirements and valuation practices, burdensome inspections, and corruption. These practices introduce uncertainty and increase transaction costs for enterprises across the whole economy.

In the realm of tax administration, companies are affected by lack of consistency in awarding fines and penalties. This is (in part) caused by ambiguity in tax legislation and related government decisions, letters, and other documents. The lack of consistency reduces companies’ capacity to plan because their tax-related costs are uncertain.

Companies also face higher costs of doing business due to overlapping requirements related to licenses, permits, authorizations and inspections. In 2012, managers reported spending 10 percent of their time complying with government regulations on behalf of their firms.

In terms of competition, Moldova’s economy is characterized by a high concentration of firms in some industries, and cases of abuses of dominant positions, monopolistic profits, collusion, and other horizontal and cartel agreements.

In the launch of the study, Deputy Prime Minister and Minister of Economy Valeriu Lazar said that this is an important report, which addresses key constraints and policy priorities to Moldova’s economic development and competitiveness.