The government is ready to support the initiative of the Alternative parliamentary faction to abolish the minimum real estate tax rate. The faction made such a proposal after the revaluation of housing in Moldova. NM explains why experts call this initiative a “double-edged sword.”
The Ministry of Finance gave a positive opinion on the bill of the Alternative faction deputies Ion Chicu and Liliana Iaconi, which provides for the abolition of the minimum real estate tax rate. At a meeting tomorrow, April 22, the Cabinet of Ministers will likely support this conclusion. Deputies registered the bill at the end of February.
Currently, the Tax Code provides that for residential real estate, summer cottages and garages the minimum tax is 0.05% of the cadastral value, and for agricultural land – 0.1%. Tax rates are determined by local authorities, and property tax revenues go to local budgets.
What does the bill provide?
The bill by Chicu and Yaconi proposes the abolition of minimum tax rates for residential real estate, as well as garages and summer cottages. In the explanatory note, the authors explain the need for this by the revaluation of real estate, the results of which were announced at the beginning of this year (NM spoke in detail about how the revaluation took place Here).
In the bill, deputies also provide several examples, noting that in most cases local authorities set the residential property tax at 0.1%. In this case, for a three-room apartment in a new building, the tax will increase from approximately 600 lei to 1,500 lei per year, and for an apartment in an old building – from 410 lei to 1,200 lei.
“Even if the rate is reduced, for example, from 0.1% to 0.05%, there will still be cases of significant increases in property taxes. Accordingly, this approach will not allow citizens to gradually adapt to the new cadastral value of housing and will create sharp financial pressure on family budgets,” the explanatory note says.
In its conclusion, the Ministry of Finance proposes to abolish the minimum tax also for agricultural land. In both cases, rates must be approved by local authorities.
“Removing this threshold would allow tax rates to be adapted to economic and social realities (…). At the same time, this measure would provide local public authorities with an additional legal instrument to reduce the impact of periodic revaluations of real estate on taxpayers,” the Ministry of Finance said in its conclusion.
In addition, the Ministry of Finance announced that in the fiscal policy for 2027 it plans to review the regulatory framework related to the possible re-introduction of maximum rates, as well as provide local authorities with the opportunity to apply individual benefits for individuals when paying property taxes.
What’s wrong with this?
The executive director of the Congress of Local Authorities (CALM), Viorel Furdui, noted that the authorities’ decision is “a double-edged sword.” “At first glance, this corresponds to the principles of local autonomy, since it gives local authorities the right to set, among other things, the minimum rate. But in the current conditions, this could negatively affect local budgets,” says Furduy.
According to him, in practice, local councils, being political bodies, can even set a zero rate – in the interests of individual “stakeholders” or businesses. “There are local stakeholders and business people who can have significant influence on councils. This could lead to conflicts between mayors and councils,” said the head of CALM.
He added that the organization proposed an alternative option: maintaining the minimum rate, but giving local authorities the right to reduce it if there is justification (for example, for investors). “We proposed such a formula, and this will be a certain barrier against the use of the situation for dishonest purposes,” concluded Furduy.
Subscribe to our Telegram channel @newsmakerlive. Everything that is important to know right now about Moldova and the region quickly appears there.
Want to support what we do?
You can contribute to quality journalism by supporting us one-time through the E-commerce system from maib bank or by taking out a monthly subscription to Patreon! This way you will become part of changing Moldova for the better. Thanks to your support, we will be able to implement even more new and important projects and remain independent. No matter how you support us, you will receive a small gift. Follow the link to become our partner. It’s not difficult and even pleasant.
