Ministry of Finance: “Reconsideration of Taxes for Electronic Service Providers is Not Part of Next Year’s Policy”

The Ministry of Finance proposed, “for the purpose of improving tax and customs legislation,” introducing into the Tax Code a tax for providers of electronic communication services. Until now, only mobile network operators paid a tax of 2.5% of sales revenue. Officials from the Ministry of Finance suggested reducing this tax to 1.5% and extending it to all providers of communication networks and services “in order to ensure fairness on the market among electronic communication service providers, as they participate in collecting budget funds.”

Members of the Association of private companies specialized in ICT (ATIC) and the European Business Association (EBA), who were invited by the Ministry of Finance to a debate on August 10, 2017, rejected this initiative. In an open letter addressed to Prime Minister Pavel Filip, to the Ministry of Economy and Infrastructure, to the Ministry of Finance, and to the National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI), they argued that the new taxes will result in increased fees for Internet, telephone, and television services, and “many small and medium enterprises will disappear.”

“The new tax will jeopardize the Government’s efforts of implementing electronic governing, given that all digital interactions will become more expensive; unfair competition will emerge on the local market; (…) tariffs on providers’ services will grow; consumers, end users will be affected,” says the letter to authorities.

Media Azi asked Alexandru Machedon of ATIC to comment on the possible impact of such a tax on electronic communication providers. He underlined: “The introduction of this tax is aimed at monopolizing the market and destroying small and medium operators, because this burden of 1.5% will decrease the companies’ ability to develop, increase their employees’ salaries, and bring innovation to Moldova.”

In his turn, Vladimir Topal, president of the Association of Cable Televisions, considers such a tax unfair: “We already pay taxes. We already are exposed to certain risks, because we work in conditions of unfair competition, and very many companies are forced to stop their businesses. That is why we cannot afford any additional taxes. My company is individual, meaning that the investment is mine, I got no grants or state support, so why would they force a new tax on me?”

Following criticism in media, the Ministry of Finance announced in a press release early this week that “the introduction of a 1.5% tax for electronic communication services is not in the set of proposals regarding the tax policy for 2018, developed by the Ministry of Finance, nor is it in the summary of objections and proposals formed as a result of public consultation about the initial policy, so the current state of affairs shall remain in place.”