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In absence of modernized tax system, local authorities move in a vicious circle

The local taxes in Chisinau cover only 2.8% of the local budget costs and the local public authorities are in an unfavorable situation compared with the central authorities. Each year, the local taxes decrease as share of the costs of public budgets, said economist Veaceslav Ioniță, expert of the Institute for Development and Social Initiatives “Viitorul”. According to him, if a tax system that does not imply taking annual decisions is not designed, the local authorities will simply move in a vicious circle for fear of taking decisions, IPN reports.

In an event staged by the Coalition for Decentralization, where there was presented a study titled “Modernization of the system of local taxes as a basic instrument for increasing local financial autonomy”, study author Veaceslav Ioniță said the taxes collected by the local authorities have a fixed rate and the mayors annually need to ask the local councils to adjust the tax rates. The local taxes were thought up so that they apply to business entities only and a conflict between mayor’s offices, local councils and businesses appears as a result. The tax basis should be extended so that it covers the people from the community.

“The Government controls the taxes that grow annually and allowed the mayor’s offices to use the stagnant taxes, like the land tax. In 1996, this tax was 1.5% of the GDP. During 25 years, the Government, having great care and pity for farmers, hasn’t modified it and this now represents 0.07% or is 21 times lower,” stated Veaceslav Ioniță.

He noted that the parking and cleanup taxes should be specified. There should be delimited the parking tax paid by all the business entities that have parking places and the tax for using the parking place, the public place cleaning tax and the tax for the individual waste collection service.

The mayor of Strășeni Valentina Casian in the event said the local self-government is affected by the absence of communication. “The European Charter of Local Self-Government provides that all the duties of the local authorities should have financial backing, but we do not have something like this. The division of local taxes is a very important element when we speak about own incomes. This system is outdated,” stated the mayor.

Promo-LEX programs director Nicolae Panfil noted that in time the local public authorities, in particular the local councils, didn’t come with initiatives to improve the system of local taxes or to propose tax rates that would bring incomes in the locality. This should be done.

The Coalition for Decentralization is a discussion platform designed to advance the process of decentralizing and strengthening local self-government. It was launched at end-June by the Congress of Local Authorities of Moldova, the Institute for Development and Social Initiatives “Viitorul” and Promo-LEX Association.

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