Moldova's capital warns fiscal reform threatens local autonomy
The Chisinau Municipality demanded a comprehensive revision of the proposed 2027 national fiscal policy on Tuesday, June 23. Local authorities argue that any decision impacting local public budgets must follow genuine and effective institutional consultations.
General Mayor Ion Ceban stated that the capital's administration has faced prolonged financial pressure and fiscal constraints from the central government. According to Ceban, local budgets are repeatedly forced to absorb the costs of centralized decisions made without financial backing or prior consensus.
Projected municipal revenue losses
The municipality estimates that the draft fiscal and customs policy for 2027 could reduce Chisinau's revenue by over €45.92 million (approx. 900 million MDL). "You cannot demand municipalities to secure public services while simultaneously cutting their revenues," Ceban stated during a public conference on local financial autonomy.
The projected deficit includes a €45 million loss driven by lowering the personal income tax rate to 7%. Additionally, the abolition of the local landscaping tax will eliminate another €2.65 million from the city budget, further compounded by proposed caps on other local fees.
Member of Parliament Olga Ursu, representing Ceban's party fraction, estimated that the central government's tax blueprint would cause a €137.75 million (approx. 2.7 billion MDL) revenue shortfall for local authorities nationwide. Ursu questioned how local decentralization can be achieved under such restrictive resource allocations.
Structural imbalances and historical precedents
The financial strain is particularly visible in social sectors, according to Aliona Drăgănel, the interim head of the General Directorate for Medical and Social Assistance. Data indicates that the Chisinau Municipality currently covers 81% of its social protection expenditures, while the state budget contributes only 19%.
Deputy Mayor Ilie Ceban noted that recent legislative amendments have systematically chipped away at local resources. For instance, the elimination of the mobile vehicle advertising tax results in an annual loss of approximately €306,000 for the capital.
Deputy Mayor Olesea Pșenițchi provided a historical analysis of the local public finance reform implemented in 2015. Pșenițchi argued that if the previous allocation mechanism had been preserved, Chisinau would have generated an additional €316.32 million in revenue by 2025.
Impact on small businesses and procedural flaws
The Head of the Directorate for Economy, Trade, and Tourism, Roman Vitiuc, warned that eliminating reduced Value Added Tax (VAT) rates for several product categories will hurt both citizens and businesses. Vitiuc emphasized that fiscal austerity cannot substitute economic development.
Petru Gurgurov, director of the Municipal Center for Entrepreneurship Development, added that standardizing VAT to 20% on essential goods will reduce consumer purchasing power. This measure is expected to directly inflate production costs for small and medium-sized enterprises.
Alexei Paniș, a legal advisor to the Mayor's cabinet, pointed out procedural irregularities in the legislative process. Paniș noted that the public consultation windows published across different official government platforms do not match, reducing predictability and hindering effective institutional participation.
Government response and policy objectives
In response to the municipality's criticisms, Aliona Jignea, head of the Government's Communication Directorate, clarified that the project is still in its public consultation phase. The Ministry of Finance has already conducted rounds of talks with trade unions, business associations, and employers.
The central government remains open to receiving constructive feedback to ensure the final draft is balanced and sustainable. According to the Ministry of Finance, the overarching goals of the 2027 fiscal policy are to simplify the tax system, stimulate private investments, and curb tax evasion.
Key proposed nationwide changes include standardizing all VAT rates to 20% and increasing the capital gains tax to 15%. Additionally, the ministry plans to replace personal income tax exemptions with direct monthly payments of 500 MDL, supplemented by 200 MDL per child, while reducing income tax to 7% for brackets under one million MDL annually.
The central authorities also emphasized that while gross salaries will be legally realigned to match total employment costs, the actual tax burden on employees will not increase.
Translation by Iurie Tataru
