Protectionism and corruption hinder combat against underground economy, IDIS

The scale of the Moldovan underground economy asks for immediate action from the authorities, notes doctor in economics Gheorghe Costandachi, author of the study “Moldova: prey for the underground economy and fiscal evasion” launched by IDIS Viitorul, reports Info-Prim Neo. “According to the data from the National Bureau of Statistics, Moldova’s illegal economy had a stable share, at about 25%. However, studies done by experts and specialized institutions from abroad, who used different evaluation methods, have a number twice as large”, the expert mentioned. According to Gheorghe Costandachi, the black market economy affects economic growth, distorts all economic parameters, generates issues in the fiscal-budgetary system and to the mandatory medical and social insurance systems, increases corruption within all tiers of society, prejudicing the country’s imagine. “It is very important for the state institutions to collaborate and adopt legislative measures for combating this phenomenon, as well as enforce these measures”, stated the IDIS expert. Victor Ciobanu, commentator for the “Argumenty i Fakty” newspaper, pointed out that, according to some data, the value of the illegal economy equals the yearly Budget of Moldova. “Basically, we have two economies, each with its own rules, activating in parallel. The fact that there is no certain data on the underground economy’s size is proof that some State institutions, or better, some people from the government, are interested in maintaining the current situation instead of working to create new jobs, reopen some branches of the economy, and inform the population about the real problems generated by illegal entrepreneurship”, said Victor Ciobanu. President of the Management Consultants’ Association Ion Prisacaru, who had worked several years for the State Fiscal Service, said that the study should’ve covered more in terms of causes for the emergence and development of the black market. In his opinion, this phenomenon can be explained through increased fiscal pressure on businesses, not only through the introduction and increase of certain taxes, but specifically through their enforcement methods, and through the fiscal employees’ inefficiency in preventing and combating fiscal evasion, along with society’s tolerance towards the latter, including economic agents who activate within the legal bounds of the labor market. “The study surfaced several numbers, including the sum of sanctions applied for fiscal evasion, which is supposedly higher than the sum of additional taxes paid by the businesses that were sanctioned. This numbers raises doubt. We cannot deny that the sanctions are calculated, but not all of them are paid, due to various hindrances, cases of protectionism, and an addition here being the judiciary system, with its well-known particularities, resulting in a larger sum of sanctions in the reports, but the money don’t reach the Budget”, commented Ion Prisacaru. The study notes that underground economies are increasing world-wide. In 1997 the global black market share was 32%, whereas in 2009 it was already at 36.5%. A negligible decrease was registered only in 11 countries. According to a World Bank report published in 2010, the largest black market share relative to the GDP for the years 1999-2007 was registered in Georgia, at 68.8% of the GDP, followed by Bolivia with 68.1%, and Azerbaijan at 63.3%. The lowest underground economy share was registered in Sweden, at 8.6%, the United States at 8.8%, and Austria at 9.8%. In 1999-2006, Moldova’s share of the black market was registered at 45.08%.