Individual incomes might be subject to flat-rate tax

The specialised ministries, including the Ministry of Economy and Commerce, and the Ministry of Finance are discussing the possibility to reduce the tax on individual incomes in the course of working out the 2008 Fiscal Policy. Minister of Economy and Commerce Igor Dodon says that the authorities have to find a motivation for the economic agents to stop practicing underground salary payment by reducing social taxes. At the end of April, the authorities will discuss the 2008 Fiscal Policy draft. According to Dodon, MEC tabled several proposals on the social taxes, particularly suggesting to cut social taxes, once the wage funds will get higher. Two options are tabled: a flat-rate tax of 12% or differentiated taxes – of 7 and 18%, including increasing several times personal exemptions. However, businessmen consider that a flat-rate tax of 12% would be more equitable. Businessman Igor Crapivca said that it is not fair to set higher taxes for the employees with higher salaries. In case of a flat tax, they already pay higher sums to the budget. The cited source said that at present, the companies have troubles in finding professional staffers. Moreover, they can not keep them because of the inadequate salaries, lowered by extremely high social taxes. According to him, in case certain companies would decide to pay EUR 500-700 to a top specialist, they would have to pay the same sum as taxes, which is a significant burden for businesses. In 2006, about MDL 1.127 bln were collected from individuals as income tax, as against MDL 865 mln in 2005. As from January 1, 2007, the taxes for the individual persons, households in villages (farmers) and individual entrepreneurs were reduced and constitute 7% of the annually taxable income which does not exceed MDL 16.2 thousand, compared with 8% paid in 2006. At the same time, of the taxable income which exceeds the sum of MDL 16.2 thousand and is not higher than MDL 21 thousand, the tax rate constitutes 10% in 2007, compared with 13% in 2006. The share of 20% from the annually taxable sum which exceeds MDL 21 was maintained for 2007.