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Veaceslav Negruta: Wealth tax, precedent for compensation and redress to the Constitutional Court

2017.03.17 Economie Victor Ursu Print version

The Government is seeking financial resources to balance public finances and to allow honoring commitments and promises on the spending side. In this context, in 2016, the Government came up with some tax inventions . We talk about the wealth tax, which is limited to taxing buildings for housing, worth more than 1.5 million MDL and an area less than 120 square meters. Is there anything else in the Tax Code, the real estate tax is already provided. The big problem is that with the introduction of wealth tax we will see double taxation of the same good and the same subject of taxation. This is a constitutional mismatch. Furthermore, all OECD and IMF recommendations on tax matters exclude the double taxation and cataloged as an abusive practice. It is the opinion expressed in the program "15 minutes of economic realism" by Veaceslav Negruta, associated expert.

Another issue is that tax revenues from real estate and other properties are sources of income for local authorities, which completes its local budgets. Or by introducing wealth tax we have interference of the central government over local authorities' financial rights. On the one hand, the real estate tax is paid in the local budget and the same building; the same owner is charged a wealth tax, which is paid from the state budget. These practices are unacceptable and detrimental to the construction and concept that was placed at the base of the Tax Code.

"Wealth tax which was introduced from July 1, 2016, violates another citizen's right. He applied for the entire period of 2016 while the law was implemented only last six months. Concerned citizens have paid twice as much. Another problem - the revaluation of real estate has not been completed in rural and wealth tax applicability entails risks for owners of housing. Under a depreciation of the leu against the dollar or euro, a house may cost more and thus become subject to tax. We may wake up that many citizens are indebted state due to MDL depreciation", explained Negruţa.

In his view, the determination of wealth tax must set clear criteria to have some undesirable phenomena. The real estate market may abound with offers due to debt payments, on the other hand - to witness the phenomenon of the division of property into separate parts with separate cadastral creating more goods and attempts respectively to circumvent taxation. That would mean fictitious divorces, unwanted social things.

"Such inventions are dangerous. It takes a deep approach to be involved responsibility fiscal policy and assessing buildings, central, and local authorities. Original packaging is the strange law which came as it will be a "luxury tax". It's not the luxury, but people used as dwelling buildings. However, some individuals have other properties such as, for example, garages that are not intended for housing but can be worth more than a house. There are other things that have fallen somewhat from this tax "luxury things" because it was an attempt to "sell" to the public this tax as tax tracking of certain categories of citizens wealthy. In reality, however, it has set a precedent with serious risks that this law is challenged in the Constitutional Court, people to seek damages from the law in 2016", said Negruta.

In conclusion, the economist said that the Government is seeking for financial resources. Or those populist promise and electoral costs increase salaries of certain categories and fiscal consolidation is not properly understood and applied by governments in Moldova. Fiscal consolidation does not mean inventing new taxes, but enlarging the tax base by attracting those goods and income that have not been taxed so far, the legality of fiscal requirements. From this point of view, there is a very useful tool for authorities. It's the indirect method of assessment and taxation of property and income, but the law implemented in 2013 remains legally applied in practice. In Moldova are special phenomena, we have individuals who have allowed certain purchases were not entered into the field of taxation and here IRS could contribute by imposing voluntary compliance and indirect methods fiscal consolidation real and not invented by new taxes and non-compliant definitions and methodological legal norms and international recommendations.

For further details, please contact the Press officer of IDIS Viitorul, Victor Ursu at: or by phone 069 017 396.

The broadcast is performed by IDIS Future in partnership with Radio Free Europe.

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