Deficiencies of the value added tax system in the Republic of Moldova from the perspective of EU directives

Abstract

Public revenues collected from the value added tax (hereinafter - VAT) ensure the financing of 47% of the total state budget expenditures in the Republic of Moldova, which demonstrates the main function of this type of indirect tax to contribute to the formation of budget financial resources. At the same time, VAT can be used by public decision-makers to stimulate or make the consumption of certain types of products more affordable, especially those of social importance (food, medicines, etc.). From the perspective of economic processes, it is essential to ensure the principle of VAT neutrality, which materializes in the economic value chain of goods and services through the right to deduct VAT amounts. This principle must ensure that companies operating under similar conditions must be subject to the payment of the same amount of VAT. The compliance with this principle should be analyzed in a comprehensive manner, on the entire value chain of production of goods and provision of services. A priori, we can mention that tax systems that are characterized by a host of exemptions and reduced quotas are more likely to create dysfunctions of the principle of neutrality and, respectively, of economic processes. The principle of neutrality is the basis of EU Directives, but also of the caselaw of the European Union in the field of VAT. This article proposes an analysis of the VAT system in the Republic of Moldova and the identification of elements that do not correspond to the principle of neutrality, creating impediments in the development of the national economy.