Fiscal Decentralization in the Republic of Moldova

Abstract

The course towards modernization of public administration in the Republic of Moldova describes a new stage in the development of the rule of law, of the democratic system and effective provision of constitutional rights and freedoms in the Republic of Moldova. From this perspective, the concept meets the motivations, objectives and criteria necessary for the creation of a lean, efficient and appropriate to the objective of Moldovan modernization and Europeanization, system, in the context of EU-Moldova Action Plan implementation, and expansion, starting with 2007 of EU to the western borders of the Republic of Moldova.The need for a strategic vision for the development of local and regional public administration system defines political effort to speed up internal changes and consolidation of the rule of law, optimization of public authorities system, and clearly defining the role of state and local administration in the society. Local and regional public administration system reform complements previous effort of developing and implementing the Strategy on central administration reform (2005), identifies main strategic development objectives in the context of previously ratified conventions related to international community, reevaluates previous recommendations provided to central authorities by Congress of Local and Regional Authorities of the Council of Europe, at the same time, estimating the effort required for setting up a modern system of public administration in the Republic of Moldova. Decentralization leads to establishment of a political and administrative environment consistent with the principle of subsidiarity. Decentralized and autonomous local authorities can contribute more effectively to poverty reduction by providing social services to the most vulnerable groups, in a more efficient, flexible and innovative way. Decentralization is a tool for conflict mediation, providing democratic structures and methods of participation in the governance. Decentralized administration is defined, as well, as a transfer of tasks, resources and powers from the state to the primary and intermediate level within cooperation and solidarity relations.The importance of Fiscal Decentralization reform in the Republic of Moldova is clearly envisaged in the pursued strategic objectives.Decentralization can only be effective if the LPA can collect a significant amount of revenues directly from beneficiaries of public services on administered territory. The connection between the beneficiary and taxpayer is relevant from public finances perspective and illustrates the direct link between taxes and benefits for the local community. This provides additional leverage to LPA, including attracting investors and respectively, local economic development.