National Business Program – joint plan aimed at improving business environment. Economic analysis by Info-Prim Neo

The National Business Program for 2009 that is to be launched this week is intended to be a joint plan of private businesses that could help improve the business environment. Moldova must amend the legislation and carry out a series of reforms that would support the more efficient development of businesses. After revising the legislation that regulates business, implementing the so-called Guillotine law during the past two years and introducing the zero tax on reinvested profit for legal entities, the businesses developed at a more rapid pace. But these accomplishments and policy changes resulted from a gloomy situation for the private companies, which chiefly strived to recover arrears and correct certain mistakes during these years. Moldova, which is placed much below the middle in the business environment rankings by international institutions, must implement similar radical changes in other areas too so as to insure better development conditions for the private sector. What are the priorities that the businessmen consider should be high on the national list? "A top priority is the formulation of a mature legislative basis that would enable the market institutions to work efficiently and would stimulate private initiative,” the businessmen consider. The associations of businessmen suggest: - implementing a system for analyzing the impact of regulations; - instituting the post of ombudsman in business; - revising the paid services provided by the public authorities; - introducing a common tax for private individuals; - canceling the collection of VAT on the import of equipment in advance; - gradually shifting the social protection tax from employer to employee; - liberalizing the pay system and the health insurance market; - excluding any forms of property expropriation outside court; - working out alternative methods for solving work conflicts; - legalizing the practice of offering ‘social packages’ by the employer. The businessmen also say that there should be promoted clear policies for protecting all the kinds of property – intellectual, patrimonial, reduced the administrative barriers and the state interference in economy and created a competitive framework. These are only some of the proposals put forward by the businesspeople. “These are the proposals of the whole business community included in a joint plan and not of a separate association or group,” the businessmen say. “We propose optimizing taxes, not cutting them as the Government says in order to discredit us,” the president of the Businessmen’s Club “Timpul" and a member of the National Employers Confederation Igor Crapivca said recently, when referring to the idea of instituting a common tax and a 22% social insurance contribution for employers and of reducing it by two percentage points during the next five years. This proposal formulated by the National Employers Confederation is also included in the National Business Program for 2009. “Such a solution is designed to remove the barriers that hinder the several-fold rise in the salary fund in economy. In 2-3 years, we could increase it by 6-7 billion lei. Consequently, the salary would rise by 100% and not by 20-30%. What would the budget gain in this case? The social fund and the heath insurance fund would avoid the crisis that is taking shape,” Crapivca said. “What we are trying to do can be named in short “administration of motivation”. The employees are now totally unmotivated.” Some of the proposals regarding the amendment of the fiscal legislation and not only, which are contained in the National Business Program for 2009, had been put forward the previous years as well. But they were rejected or initially accepted and then neglected as for instance the introduction of the common tax on private individuals’ income. Several years ago, the Ministry of Finance was ready to accept the 12% rate, but rejected the idea without offering an official explanation. Recently, the National Employers Confederation bemoaned that most of its proposals were rejected even if they presented well-founded arguments. This spring, when the first Medium-Term Expenditure Framework has been drafted, the employers said that the practically unchanged fiscal policy proposed by the Government for the next three years would not favor the development of legal entrepreneurship. The demanded amendments have not been introduced. This is not the only example. Another example is the privatization of agricultural land on which the Association of Foreign Investors has insisted for many years. What is the guarantee that the business will be now heard? The National Business Program will be a concerted and not solitary action. In fact, the program is not a package of demands, but a list of problems that the Government and the business must solve,” said Veaceslav Ionita, expert of IDIS “Viitorul”, which put up the idea of this process called the National Business Program, which was effectively implemented in Ukraine Poland, Montenegro, Romania.