Parliament activity, April 11-16, 2004
21 April 2004
During the aforesaid period, Parliament convened on only one session on Friday. Thus it was possible to avoid the Government interpellation usually scheduled for Thursdays. Lack of Government interpellation for two weeks in a row determined Christian-Democrat leader to ask the floor right at the beginning of the plenary session. As he was denied, Iurie Rosca blocked the central tribune and one of the microphones in the hall. After several calls to comply with the Regulation and Christian-Democrats refusal to do so, the session was held using the other microphones.
Only after all the drafts on agenda were examined Christian-Democrats were given the floor. Iurie Rosca read a declaration accusing the Speaker of breaching oppositions' rights and concealing information requested by opposition. The latter attracted a storm of criticism from the majority faction, which called on opposition to observe the law. Majority faction also called on amending Parliament Regulation so as to allow use of force in order to resume legislature sessions.
During the session Parliament examined a number of important pieces of legislation.
I. Law on offshore tax
ADEPT Comment: Despite the rich harvest of criticism and objections, the Parliament still passed the law. Though, it perfected and clarified on quite contradictory provisions.
The law defines offshore tax and offshore zone. The list of offshore zones is to be approved by the Government. The law also outlines the subjects of taxation, namely legal or natural entities, residents of the Republic of Moldova falling in the categories outlined in fiscal legislation, engaged in trade and financial transactions via offshore zones. The law also outlines which particular operations shall be subject of taxation:
- payment/transfer of funds to a bank account of a non-resident registered in the offshore zone opened in a bank located in an offshore zone or any other country;
- payment/transfer of funds via banks registered or located in offshore zones to the bank account of any resident or non-resident opened in any country;
- payment/transfer of funds to a bank account of a Republic of Moldova resident opened in an offshore zone;
- non-monetary pledges to non-residents of the Republic of Moldova registered in offshore zones;
- assignment of obligations towards companies registered in offshore zones with the participation of other non-residents than those registered in offshore zones.
The law also provides for exemptions from the offshore tax:
- to return funds received by the resident as a bank credit or loan to legal or natural entities of the Republic of Moldova, as well as to pay back for the goods imported under leasing contracts, interest rates and commissions in line with the contract and legislation in force;
- for goods imported on the soil of the Republic of Moldova and services rendered prior to the enforcement of the law;
- for the banks to return to non-resident legal or natural entities related funds to deposits in Republic of Moldova banks;
- to return foreign investments made in the Republic of Moldova as well as other funds part of the investment activity.
Off-shore tax shall be paid to the state budget by the residents of the Republic of Moldova, subject to taxation, in MDL at the official National Bank exchange rate equal to 15%.
Offshore tax shall be considered part of general and administrative expenses and shall be deducted from the income subject to taxation when calculating income tax. In case of delay to pay the offshore tax in due time a fine shall be calculated in line with the Fiscal Code provisions. Failure to comply with reporting regulations shall be also sanctioned.
It is worth mentioning that one of the major objections to the law was that it would propel fuel prices upwards, as well as prices on other imported goods; affect current and would-be investors; raise contradictions between national law and international treaties providing for excluding double taxation, etc.
As the law was approved in the final reading, one may finally say the proponents of the law who claimed the law would secure additional revenues to the state budget, won after all. Those funds would be really needed in a pre-electoral year among others for electoral campaign.
II. Resolution on approving Regulation on spending funds from the Agriculture Development Fund
ADEPT Comment: Article 15 of the Law on State Budget for Year 2004 provides for establishing a fund for agriculture development worth 36 m MDL. The Parliament was to work out a procedure for spending the fund, however the presentation as such was delayed for quite some time.
Under the Regulation approved by the Parliament, 22 m MDL shall be administered by the Ministry of Agriculture and Food Industry and used to subsidize and support crediting of enterprises producing agriculture products by commercial banks, savings and loan association and Rural Financing Corporation. Another 14 m shall be administered by "Moldresurse" State Enterprise and be used to build agricultural machinery centres.
The regulation also provides that subsidies granted to one enterprise shall not exceed 85 thousand MDL per year.
The fund administered by "Moldresurse" shall be used to build machinery centres as part of municipal enterprises, production cooperatives. Subsidies to help build the centres shall be granted to enterprises in amount not exceeding 25% of the machinery cost. The subsidies shall be considered as interest-free technical credit granted by the state for a 4 year period.
III. Draft law on modifying legal acts regulating petrol market
ADEPT Comment: The draft passed in the first reading adds new provisions regulating petrol and liquefied gas prices. It is expected that the Agency for Energetics Regulation shall work out a procedure for setting the wholesale and retail price in line with principles developed by the Agency that would look at minimal expenses, profitability and sales margin.
While approving the methodology for setting the price on petrol and liquefied gas the Agency will apply the principle of minimal expenses on their import, transportation, storage and sail.
Previously, retailers in the field disapproved of the Government intentions to limit profit margins and other expenses. Noteworthy, several years ago Government intention to ban petrol import by trailers led to protest rallies whereby retailers and transporters blocked the access to the capital city.
IV. Draft law on establishing sub-economic zone in Ungheni
ADEPT Comment: The draft passed in the first reading provides for establishing within Ungheni-Business Free Economic Zone a sub-zone where "Covoare-Ungheni" joint stock venture shall be based. "Covoare-Ungheni" is manufacturing carpets and rugs. A total of 2 m Euro industrial investments are expected.
Noteworthy, "Covoare-Ungheni" used to be financially supported by the state. It signed a Memorandum with the State Creditors Council that allowed it to write off a 13 m MDL debt.