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Economy

The Chicu government was criticised for its intention to introduce taxes on digital giants. Expert’s opinion

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The Government of Moldova led by Ion Chicu was criticised for the proposal of Ministry of Finance, made after the draft state budget for 2020 was made public, to oblige multinational digital companies such as Facebook, Google, Apple, Amazon, Netflix or Airbnb to register legal entities in Moldova and pay VAT on the revenues they earn from Moldovan users.

However, “going alone against the companies that rake in colossal revenues by any standards can undermine the efficiency of the whole enterprise and even affect our relationship with the United States,” it is opinated in a study, which has Vladislav Kaim, the member of the UNCTAD Youth Network and a master student in Economics at Lund University, as the author.

According to the Ministry of Finance estimations, such measures of taxation would bring additional 100 million lei in the state budget. Still, the experts community, political opposition and public reacted rather sceptically and, as a result, the Government had to postpone the entering of the decision in force from 1 January to 1 April, as it is mentioned in the study.

In the context of a union-wide digital services tax, which is aimed to be implemented by the EU in 2020, but also the disagreements between countries with different interests, “Moldova as a small market with no current stake in the future of digital economy even more so cannot afford to act unilaterally,” claimed Kaim.

“The presence of Google, Facebook and other digital giants in the life of Moldovans is ubiquitous. Thus, it is the duty of the government to make sure that our citizens get a fair deal from it, but unilateral measures imposed by a small and one of the poorest countries in Europe against the behemoths who thrive on effects of scale an global reach have a very limited potential of achieving that. Their potential impact on our relationship with the US should also be considered.”

The expert suggested two more strategies for the Moldovan government to choose from, instead of going alone against digital giants without leverage. First, to delay the adoption of the new tax until January 1, 2021, until the EU would establish a permanent solution. “Thus, the Moldovan digital taxation regime will match the one of the biggest single market in the world, which can generate beneficial spillover effects in other spheres – for example, a faster obtaining of the GDPR adequacy decision,” Vladislav Kaim claimed.

In case the executive wants to adopt a more proactive and regional strategy, it could come up with an initiative of a joint Eastern Partnership task force on digital taxation, comprised of representatives of the ministries of economy, fiscal bodies and antitrust regulators. “Aiming for an EaP wide digital service tax in coordination with the processes in the EU will likely be supported by the office of Margrethe Vestager, the vice-president of the European Commission whose mandate lies in this sphere,” specified the author of the study.

The study was produced within the project “Fostering the Adoption and Implementation of Key Reforms”, implemented with the support of National Endowment for Democracy and Watch Dog Moldova.

Photo: DAMIEN MEYER/AFP/Getty Images

Important

EU official: “It’s been a long time we’ve been patient. We will judge the Government’s actions objectively.”

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Director for Russia, Eastern partnership, Central Asia and OSCE, and Deputy Managing Director for Europe and Central Asia at the European External Action Service (EEAS), Luc Pierre Devigne, paid a visit to Chișinău today to participate in the 5th meeting of the EU-Moldova Association Committee.

He addressed a message to the Moldovan government during a press conference, criticising the way the reforms were implemented in the country, especially the way the famous bank fraud from Moldova, called also “the theft of the century” was investigated. Devigne considers inadmissible the fact that, after five years, the persons and companies that were involved in the fraud were not held accountable.

“It is unacceptable that after the theft of the billion was uncovered and deeply investigated by a leading financial investigation team – the Kroll company, whose findings were made publicly available, the investigation was still not finalised on various pretexts. We cannot believe that it is legally not possible to prosecute such a fraud.[…] It is the responsibility of the Government to ensure that justice works in the country. We want to see an open and transparent process that includes not only the Government, but also the consultation of opposition, civil society and the EU institutions recommendations.” said Devigne.

The EU official told the Moldovan politicians: “It’s time for actions. It’s been a long time we’ve been supportive, we’ve been patient. Now, we will judge the Government’s actions objectively.”

“The EU has always supported the Republic of Moldova, but the EU cannot substitute for good governance and the actions that should be taken by the Government. Our support is not unconditional.”

He said that European assistance will depend on how laws and democratic standards will be respected in Moldova. Particularly, Luc Pierre Devigne mentioned that the Republic of Moldova should join the Anticorruption Network for an effective fight against corruption, strengthen independent media and improve the quality of life in the case of the Moldovan citizens.

Luc Pierre Devigne also referred to the subject of the Citizenship by Investment Law, on which the Government applied a moratorium, but only until February 24, 2020. The official was disappointed that people who obtained such kind of citizenship remained anonymous. “We do not see this as compatible with a serious and secure visa liberalisation regime. It’s a security issue.” highlighted Devigne.

One of the central messages of the EU delegation to Moldova concerned the importance of boosting the cooperation between Moldova and the community bloc.

At the same time, the Moldovan authorities reiterated their commitment to comply with the recommendations of international organisations such as the OSCE and the Venice Commission, and to ensure public consultations on major projects.

Photo: cotidianul.md

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Economy

Global Talent Competitiveness Index: Moldova when it comes to Artificial Intelligence

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The 7th edition of the Global Talent Competitiveness Index (GTCI) addressed the topic Global Talent in the Age of Artificial Intelligence. The index is used to rank 132 national economies, across all groups of income and levels of development, that representing 97% of the world’s GDP and 94% of its population. The report referred, first of all, to the level of innovation and technology development, exploring how the development of Artificial Intelligence (AI) is not only changing the nature of work but also forcing a re-evaluation of workplace practices, corporate structures and innovation ecosystems.

This year, Moldova ranked 86th out of 132 analysed economies, being ranked behind the neighbouring countries such as Ukraine and Romania, which ranked 66th and 64th, respectively.

The countries that are best positioned to benefit from the AI revolution are also the most developed countries in the world, especially when it comes to the competitiveness and potential of attracting and training best professionals. Top ten countries in the ranking are Switzerland, the United States of America, Singapore, Sweden, Denmark, the Netherlands, Finland, Luxembourg, Norway and Australia.

New York, London, Singapore, San Francisco, Boston, Hong Kong, Paris, Tokyo, Los Angeles and Munich are among the most developed cities in this regard.

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source: insead.edu

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source: insead.edu

GTCI highlights

One of the most important observations made in the GTCI report for 2020 is that the gap between talent champions (almost all of them high-income countries) and the rest of the world is widening. Still, AI may provide significant opportunities for emerging countries to leapfrog.

The top of the GTCI rankings is still dominated by Europe, including the Nordic countries – a significant number of small high-income economies, many of them being either landlocked, island or quasi-island economies, including Switzerland (1st), Singapore (3rd), Luxembourg (8th), Iceland (14th) or Austria (17th).

According to the report, the key factor is developing relatively open socio-economic policies in which talent growth and management are central priorities in the age of AI.

Moldova

Moldova managed to get a score of 36.64, being ranked 86th out of 132 countries. It was classified as lower-middle income country and ranked 7th out of 32 countries included in this category. The country’s talent competitiveness index weakened as compared to the period between 2015-2017, when it was listed around the 61st position.

Moldova was evaluated with the highest scores for such aspects as gender development gap, ease of doing business, number of female graduates, competition intensity and political stability, while the lowest scores were given for its share of R&D expenditure, robot density, university ranking, number of registered researchers, scientific journal articles, labour productivity per employee, new business density and collaboration across organisations.

This year’s model of the GTCI index includes a total of 70 variables, up from 68 indicators used in the GTCI 2019.

source: insead.edu

Photo: cambridgealert.com

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Society

How corrupt Moldovan citizens are? Comparative figures

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When talking about corruption, most of Moldovan citizens blame the ‘system’ built by politicians and their political regimes throughout history. And that may be true, but only to some degree. When looking deeper, it can be actually observed that little corruption acts are perceived as a normality by a lot of individuals and legal entities in the country. That is what is shown in a recent study conducted by by the Center for Social Studies and Marketing “CBS – Research”. The study assessed the impact of the National Integrity and Anticorruption Strategy for the years 2017-2020.

 516 million lei – this is the total amount of bribes offered by Moldovans in 2019. On average, a Moldovan citizen has offered at least five bribes, while an enterprise has been involved in about three corruption acts. Businesses paid bribes worth 197,3 million lei, while individuals offered a total of 319,4 million lei as bribes during the last year, estimated the study. The value of the one illegal payment ranged from 50 to 20 thousand lei.

The research was carried out on the basis of a national survey where 1 120 persons, 506 companies and 606 civil servants from central, district and local public administration participated. The data were presented in comparison to the situation in 2017, when the first such survey was conducted. It was carried out within the project “Fight against corruption by strengthening integrity in the Republic of Moldova”, implemented by UNDP in collaboration with the National Anticorruption Center, and the support of the Norwegian Ministry of Foreign Affairs.

The total value of the bribes offered by Moldovans is lower, however, compared to those from two years ago, when the amounts varied between 100 and 500 thousand lei in the case of companies and between 50 lei and 8 thousand lei in the case of individuals, as the study stated.

Even though the study affirmed that corruption remains a serious problem for the Moldovan society, the level of intolerance of the population towards corruption has increased. Thus, about 62% of individuals (compared to 45% in 2017) and 83% of businesses (compared to 61% in 2017) consider any corruption situations unacceptable and declare that they do not accept to offer or receive bribes, regardless of the situation and implied personal benefit.

Moreover, both individuals (73% of respondents) and companies (80% of them) are aware that bribery entails punishment of both parties involved, and 87% of them, on average, would report the corruption acts to the anti-corruption agencies in the event of such a situation.

In the opinion of the civil servants participating in the survey, among the main causes of corruption are the low salaries in the public sector and the mentality of demanding and giving bribes in money and /or goods.

The same causes for corruption acts were emphasised by a survey conducted by Transparency International (TI) Moldova throughout the employees of 13 central public authorities. The survey results revealed that a quarter (24.6%) of civil servants who work in public institutions, and answered the survey, consider that their workplace is affected by corruption. More details about the survey can be found here.

Although the legislation obliges civil servants to report corruption cases and other abuses to the head of the public entity or to the responsible authority, a considerable part of the respondents (about 27%) are openly not willing to do it for reasons of personal security and lack of trust in empowered bodies, according to the TI-Moldova report.

Thus, the main factors that could determine the involvement of citizens in corruption abatement activities are the confidence that they will be protected if they denounce a public official for corruption acts, as well as the trust in the independence of the justice, showed the Center for Social Studies and Marketing study, as being reported by TV8.

“Committing acts of corruption must become non-profitable. But to drive forward those reforms, independent, effective, and incorruptible leaders of the judiciary and law enforcement bodies are urgently needed,” said Stanislav Pavlovschi, a Moldovan judge formerly at the European Court of Human Rights (ECHR), for the Global Voices portal.

In 2019, Moldova registered a score of 32 points for the Corruption Perception Index for 2019 released by Transparency International, being ranked 120th out of 180 countries. The score for Moldova worsened as compared to the 2018 year, when the country recorded 33 points, whereas improved when confronted to the data from 2017 – 31 points. More details here.

Photo: freepik.com

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