June 9, 2016Michael Sutherland-Shaw
If you drive a car, I’ll tax the street,
If you try to sit, I’ll tax your seat.
If you get too cold I’ll tax the heat,
If you take a walk, I’ll tax your feet.
Don’t ask me what I want it for
If you don’t want to pay some more
‘Cause I’m the taxman, yeah, I’m the taxman
– The Beatles
For The Beatles, the taxman was an entity cutting into their profits, for the Government of Moldova, it’s a step towards a modern and transparent administration.
The World Bank recently approved $20 million in financing for the Tax Administration Modernization Project in Moldova ($7.42 million IDA credit and $12.58 million IBRD loan).
The project “will support the fundamental restructuring of the tax administration system, by implementing a centralized and unified tax system to improve revenue collection, tax compliance and taxpayer services,” according to a press release.
In recent years, Moldova introduced the “e-declaration” system, an online payment service, which reduced the time needed for paying taxes. According to the 2016 Doing Business report, it takes 185 hours to prepare, file and pay taxes (about 21 payments per year), compared with, on average, 234.3 hours in Europe and Central Asia.
However, tax revenue collections as a share of the GDP have declined in recent years, reaching a five-year low in 2014 at 30.2% of GDP.
According to the World Bank, poor performance is in part a consequence of structural and capacity constraints in tax administration. In addition, taxpayers, both household and business, see tax administration as inefficient, corrupt and lacking clarity on rules and procedures.
Will these opinions change? Only time will tell. However, increased transparency is a pillar of any strong and open government.
“Moldova’s goal is a modern, computerized tax service where everybody can see the rules and plays by them,” said Alexander Kremer, World Bank country manager for Moldova. “The result will be less hassle for the taxpayer and more tax collected for schools, medicines and roads.”