IMF VAT demands would hit households first
The International Monetary Fund has completed its latest mission to Moldova and set out how it expects the country to shape economic policy over the next three years.
In plain terms, the message is clear: cut social support and raise more money from taxpayers.
The IMF and the Moldovan government have reached agreement on a new three-year Policy Coordination Instrument. The programme does not provide financing. However, it still comes with strict conditions.
In practice, Moldova’s fiscal policy is moving closer to external supervision. The alternative, officials fear, is a deeper budget crisis.
The main demand is to broaden the VAT base. In simpler language, that means cutting reduced VAT rates and making people pay more.
Reduced VAT rates could disappear
Marina Solovyova, programme director at Expert-Grup, warned that this would hit the poorest citizens first.
“The cancellation of reduced VAT rates will primarily affect the poorest, because they spend all their income and pay VAT. Therefore, this must be compensated through more progressive taxation of the income and property of the wealthy, the richer a person is, the more tax they should pay,” she said.
The IMF recommendations make a similar point. They state that higher consumption taxes would require a review of income and property taxation, since poorer households spend a larger share of their income.
Yet the key question remains: will the government really tax the wealthy more? Or will it simply raise taxes for everyone and later forget about compensation?
Many basic goods and services could end up under pressure. The list includes bread, dairy products, vegetables, fruit, electricity, gas, heating and hot water. It also covers pharmacy products, catering services, parcels from abroad and digital services.
Experts believe these items could move to the standard VAT rate of 20%.
Solovyova said the government had discussed applying the standard VAT rate to goods and services that now benefit from reduced rates or remain outside VAT altogether.
Ruling-party MP Victoria Belous also confirmed that the IMF wants Moldova to review the system.
“They do not set the rate at 20% or any other level. But they require a review of reduced VAT rates and items that are not taxed,” Belous said.
Citizens may pay for the state’s budget hole
Belous also admitted that the state has built up a huge debt to businesses over VAT refunds. The amount stands at around 10 billion lei.
The government cannot repay it quickly. In other words, the authorities created a hole in the budget. Now they may try to fill it from citizens’ pockets.
For poorer families, the risk is serious. Higher VAT on food, heating and medicine would not be a technical reform. It would be a direct blow to household budgets.
Meanwhile, promises of compensation through “progressive taxes on the rich” sound weak. Moldovans have heard such promises before.
The opposition is demanding the government’s resignation. But that is unlikely to stop the IMF pressure.
The policy line is already visible. Ordinary people will pay. And many of them are the same voters who were promised a “European life” by PAS.
