Moldova & IMF IMF Activities Publications Press Releases


MARK HORTON: EXPO-BUSINESS-CHISINAU IS A LOAD FOR MOLDOVA'S BUDGET

Interview with IMF Resident Representative Mark Horton

Chisinau-26.09.1998/(BASA-press)

Question: These days you have discussed with residents of the free
economic zone Expo-business-Chisinau the emergency situation the
zone has plunged into. What would be the ways to solve the clash of
opinions between the Expo-business-Chisinau and Moldovan
authorities?

Answer: During the meeting with residents of the zone, I tried to
stress on the importance of some problems. First of all, a free
economic zone for sales in retail is something unnatural in the
world. Usually, these zones are set up for export. This means that
goods are brought in these zones without being taxed, they are
processed and then exported.

I consider that the existence of this zone, in a way, legalizes the
exemption from taxes and the shirk from payment of taxes. This
means that the state insures a window for those who want to shirk
from taxes and makes more difficult cabinet's credibility for other
economic agents.

During debates with residents I understood they want the
reimbursement of their investments made in the zone or the
farther exemption from taxes. I do not see any grounds for
maintenance of these facilities, under the budgetary crisis, the
payment reduced balance, other. In my opinion, it was a mistake
from the very beginning to grant these facilities.

Expo-business-Chisinau is not a normal-type zone and it is a load
for the budget not to collect these taxes.

It seems to me that the business in this area run well. It is also
possible that residents have been compensated for investments they
made by revenues they have got. To check up this supposition, we
need to invite a third part - an audit international company which
will study records of all 63 resident-companies.

I agree with statements that frequent modifications of the
legislation diminish the credibility and investments in Moldova.
A modality to solve this conflict would be the compensation of
residents for the already made investments. But also they must
recognize that the exemption policy has contributed to the
aggravation of the financial crisis in Moldova.

Q.: What are the Expo-business-Chisinau's development prospects?

A.: A free economic zone can exist only under the form of a
processing center. Otherwise, it is impossible to find a logical
explanation. There are other businesses in Chisinau, other
entrepreneurs who have assumed some risks and who cannot rival with
the zone because of these tax exemptions. And they try to avoid
taxes via bribery, falsifications, other.

Q.: The Law on Expo-business-Chisinau reads that if new legislative
acts worsening residents' conditions of activity are passed,
residents have the right to follow, within 10 years from the
enactment of these acts, the initial law passed by the parliament.

A.: The Law on Expo-business-Chisinau does not see the exemption
from the value-added tax, this is stipulated yearly by the Law on
Budget. Also, the exemption from the customs duties and excises are
established yearly, on the basis of limits stipulated by the Law on
Budget.

Q.: How can you comment statements that the Expo-business-Chisinau
conflict affects Moldova's image before the international financial
bodies?

A.: I think that international bodies like the IMF consider that
the exemptions must be stopped. The current Chisinau cabinet is the
first Moldova's cabinet which had the courage to change the tax
collection system, tried to fight the petrol and tobacco smuggling,
other.

If we look outside the zone, other investments, except Coca-cola,
McDonald`s and some others, do not exist in Moldova. Certainly it
happens rather because of bad-defined rights to property, strong
bureaucracy and corruption than because of the zone.

Q.: If the Moldovan cabinet manages to settle the conflict, would
the IMF accept to became a guarantee of stability of normative acts
on FEZ?

A.: IMF voices against any prolongation of exemption from taxes.
If the zone deals with import of goods, their processing and
re-export, than we will support these facilities. But I do not see
the success of such affairs in Moldova, because the zone is a
corridor for smuggling.