Radio Free Europe: Moldovan New Tax Measures ‘Legalize Fraud’ . Plahotniuc accused of being involved in the disappearance of the $1 billion


The International Monetary Fund (IMF), the World Bank, and the EU and the U.S. embassies to Moldova have all criticized the new fiscal measures and urged their reversal.

„Moldova has committed itself to better relations with the EU, and has signed both an Association Agreement and memorandum on macro-financial assistance. If this tax legislation, adopted in a hasty and opaque manner, is applied, it could lead to the violation of Moldova’s obligations,” said Peter Mihalka, head of the EU mission in Moldova.

„The legislation is incompatible with current reforms aimed at strengthening the rule of law; the fight against corruption, money laundering, and organized crime; and improving the business climate,” he added.

Confronted with international and domestic criticism, the ruling Democratic Party (PDM) has argued the measures are designed to reduce poverty and downsize the shadow economy in one of Europe’s poorest countries.

Parliament speaker Andrian Candu said the aim was to assist the poorest segment of the population, and he rejected accusations that the package would help the rich and corrupt legalize dubiously acquired fortunes.

According to some estimates, the measures would deprive the budget of the equivalent of $157 million — causing concern at the IMF, which supports Moldova with a $183 million loan program.

The laws „are not in line with the objectives of the fund-supported program,” the IMF’s mission to Moldova said.

„Specifically, the adopted measures will increase the regressivity of the tax system, could undermine tax compliance, and pose significant fiscal risks,” Volodymyr Tulin, the IMF resident representative in Moldova, said on July 27, a day after parliament approved the laws.

Regressive taxation refers to a tax rate that decreases as the amount subject to taxation increases, and imposes a larger financial burden on the poor than on the rich.

Sandwiched between Romania and Ukraine, Moldova is plagued not only by endemic poverty, but also by corruption.

The disappearance of an estimated $1 billion, or one-eighth of the country’s gross-domestic product, in 2015 enraged a large majority of Moldovans, who took to the streets in protest of what they dubbed „the heist of the century.” It also disrupted negotiations with the IMF and the European Union on funding and triggered a political crisis.

The former deputy director of the anti-money-laundering agency in Moldova, Mihail Gofman, told Moldovan media last week that the new laws represented an attempt by the PDM to legalize the money stolen in the „heist of the century.”

PDM President Vladimir Plahotniuc, an influential but controversial oligarch, has been accused by some critics of being involved in the disappearance of the $1 billion.

„Their only option is to bring the stolen money back to Moldova [and launder it], since there is a risk abroad that it could be blocked by foreign governments,” Gofman said.

The U.S. Embassy in Chisinau said on July 27 it was „extremely disappointed” by parliament’s move.

„The law on voluntary declaration and tax incentives (called the law on amnesty of capital) legalizes theft and corruption, and also damages the business environment in Moldova,” the embassy said in statement.

„Citizens of Moldova have already suffered as a result of major financial crimes. Criminals should be punished, not encouraged. The people of Moldova deserve more,” it said.

Moldova has had to grapple with mass emigration and a decades-old frozen conflict with its Moscow-backed Transdniester region and the presence of more than 1,000 Russian troops on its territory.

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