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Activity of the Parliament on February 23 – March 14, 2004

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February 23–27, 2004

Last week Parliament continued examining requests filled by the Prosecution to suspend the immunity of some opposition deputies. This time however, a “Braghis Alliance” deputy joined the company of Christian-Democrats whose parliamentary immunity was previously suspended. It’s illegal privatisation, rather than protest rallies that served grounds for suspending his immunity.

Previously, Christian-Democrats were liable of administrative offence, now they are liable of penal offence for profaning Russian Federation state symbols. Under Penal Code, profaning national or state symbols (flags, coat of arms, anthem) of the Republic of Moldova or any other state — is sanctioned by penalties worth 500 units (10,000 Lei) or from 2 to 6 years in prison.

It is still not clear whether authorities would manage to prosecute opposition, one thing is for sure majority faction gave green light to Prosecution to persecute the four deputies.

Besides those issues, the Parliament adopted a series of important legal acts.

Law on VAT exemptions of imported vine

The law is aimed to support the revival of vine plantations, by exempting from VAT vine imported to Moldova. The law was lively debated, there were voices claiming that the law would affect the state budget and that Government should have come with the initiative before 2004 budget was adopted. In the end, majority faction voted in favour of the draft, as did opposition deputies. The law does not provide for concrete mechanisms of overseeing the law enforcement.

Law on publishing international treaties

Parliament re-voted the law sent back by the President of the Republic of Moldova. The law provides that international treaties ratified by Moldova should be published in Official Monitor within one month of entering in force. Ministry of Foreign Affairs should oversee this. Noteworthy, under Moldovan Constitution international acts Moldova is part to, have the same force as the domestic legislation and are to be enforced likewise. However, unless the treaties are published they have no legal effect.

Law on supplement to the pension for residents of Copanca commune

According to the law, pensioners residing in Copanca commune, situated on the left bank of Dniester, should be entitled to a supplement ranging from 50 to 100 Lei so as to bring their pension in line with those paid in break-away region. The estimated cost of the law is over one million Lei, which is to be covered from state social security. Therefore, Government is to come with concrete recommendations and mechanisms on how to cover the costs.

Noteworthy, this is the first act aimed to improve the welfare of the residents to the left of Dniester, region controlled by Chisinau. Previously similar laws were passed for residents of Cosnita, Palanca, Cocieri etc. This string of laws is aimed at giving at least some protection to the residents facing huge pressure from Tiraspol regime.

Draft law on the modification of the privatisation plan

The modifications excluded a number of enterprises specialised in constructions from privatization programme, so that they would remain under state control.

Again, there were a lot of debates and arguments around the draft law. Opponents pointed that the enterprises excluded from the privatisation are not entirely state-run, having a share of private capital. Majority faction neglected those arguments and passed the law. Throughout 2001–2003 the Parliament passed a total of 8 laws excluding various enterprises from the privatisation list.

Draft Title VII “Local taxes” of the Fiscal Code

The draft passed in the first reading regulates local taxes. Initially, some local taxes were to be excluded from the title, namely 6 of them:

Deputies agreed on excluding only two out of the six recommended by Government, namely for the right to cinema and TV shootings and for the right to trade in customs area. The other four would be preserved, so as not to impair local budgets.

Another key element of the Title is that the new structure would grant more responsibilities to the local government in exploiting every opportunity to secure revenues to the local budget. When drafted, lawmakers studied carefully the experience of other transition countries and the freedom granted to local authorities there to establish local taxes.

Local taxes would be introduced, changed or annulled upon adoption or modification of relevant budgets of the administrative-territorial units (Art.297(3)).

Under the draft, legal and natural entities “residents or non-residents that do business on the soil of the Republic of Moldova; non-resident natural entities, citizens of the Republic of Moldova, foreign citizens or stateless persons” are subjects of the law. The draft also proposes to preserve the procedure of establishing, calculating and paying local taxes. Taking into account the ceiling of local taxes, local public administration bodies would set the amount of taxes to be paid.

The draft also proposes to preserve current exemptions to the payment of local taxes for public authorities, state-funded institutions, diplomatic missions, missions of international organisations. In addition, new exemptions are proposed, i.e. for organisers of auctions held to reimburse debt on credits, damages, debt to the state budget, or to sell state or municipal patrimony. At the same time, first level representative and deliberative bodies are entitled to grant exemptions in addition to those provided by law.

To ensure consistency of the Fiscal Code, local taxes ceiling shall be provided for in Title VII. They were developed by taking into consideration the existing ones.

Draft law on energy

The draft passed in the first reading stirred a lot of debates. It outlines the principles regulating the production, transportation, distribution, delivery and use of heating. The law is intended to:

The draft law outlines a number of specialised notions, fundamental principles for the operation of the energy system, and responsibilities of specialised bodies. Separate chapters are reserved for licensing, guaranteeing property rights, and legal relations between the actors on the energy market, tariffs on energy.

Given the harsh debates we may expect that the final wording would undergo quite a number of modifications, therefore ADEPT promises to follow closely the developments.

March 1–5, 2004

During the aforesaid period MPs examined a string of draft laws. Opposition and majority faction deputies alike argued against the draft laws under consideration. Some of them shall be considered in greater detail below.

Law on the modification and completion of legal acts on retirement and social care

Parliament decided on privileged terms of retirement for women who gave birth and raised until the age of eight, five or more children. Those women may retire at the age of 54. In addition, privileged terms were set for persons working under harmful or difficult conditions, retirement age for men being 54 and for women 49. The legal framework regulating retirement has been completed with a single norm providing that minimal work experience in order to qualify for age pension would be no less than 30 years.

The Law on Veterans was completed with provisions on supplements to pensions for special merits to all categories of veterans, including those who retired from military forces.

Draft law on offshore tax

Under the draft a 15% offshore tax payable to the state budget shall be levied. The list of offshore zones shall be approved via a Government ruling at the recommendation of the National Bank of Moldova. Subjects to the law are residents of the Republic of Moldova, natural entities that carry entrepreneurial activity and legal entities. The following shall be subject to the tax:

The law also provides for the transactions exempted from the tax.

Lawmakers argued that the law was necessary due to the fact that offshore zones allow for capital outflow from the country, money laundering and tax evasion. European community recommends refraining from transactions via offshore and toughening legal provisions in this respect.

Previously, under the Law no. 633-XV of November 15, 2001 on Fighting Money Laundering transactions with one of the parties being offshore resident, or transactions via offshore bank accounts were deemed suspicious.

The law garnered a rich harvest of criticism, in particular that the law would skyrocket prices on various goods (it is estimated that around 80% of the oil transactions are made via offshore). Another source of criticism was the fact that it would affect domestic entrepreneurs, as they have to work with foreign enterprises, which prefer to operate offshore and care little about Moldovan legislation. Also, offshore tax would affect financial institutions operating in Moldova, therefore entrepreneurs would have to resort to shadow schemes of doing business.

Noteworthy, several years ago the idea of establishing an offshore or free enterprise zone on the soil of the Republic of Moldova was largely debated and was viewed as a means of attracting foreign capital. However, the talks never materialised. Now we see that Government had to resort to opposite measures.

Having said that, it is worth mentioning the real causes of the amendments:

Draft law on phyto-sanitary and fertilising products

The draft is aimed at protecting plants from various diseases in order to secure favourable conditions for sustainable development of agriculture. Due to the financial crisis the country is going through, farmers cannot purchase such products, which in turn has a negative effect on the quality and quantity of their agricultural products as well as their competitiveness on the market. The great majority of phyto-sanitary and fertilising products are imported, therefore it is important to protect the domestic market. The draft law establishes the legal framework, defines the state policy in the field, legal terms of research and experiments in the field, production, import, sale, shipment, storage and safe usage of phyto-sanitary and fertilising products.

Draft law on the modification of the Law on tobacco and tobacco products

Under the draft, tobacco and tobacco products manufactured, imported or sold by violating the law provisions shall be confiscated based on a court ruling. Afterwards they could be sold via tender on condition the tobacco meets the required standards. If the tobacco products cannot be certified and brought in accordance with the legal requirements they will be destroyed. Great many deputies objected those amendments. They argued that those amendments would boost abuses and legalization of products failing to meet the legal requirements. Another objection referred to the fact that the current system did not allow for the certification of tobacco products, which might prove to be harmful to the smokers health.

Nevertheless, the arguments brought by the Government that the draft is aimed at protecting domestic producers and securing additional revenues to the state budget prevailed over the subjective and objective criticism voiced by the deputies. Finally, the draft was approved in the first reading.

Draft law on the modification of the Law on taking goods in and out of the country by natural entities

In order to liberalize exports and facilitate the entrance of citizens residing abroad into the country, Government proposed several modifications to the law that would allow:

The latter raised a lot of criticism. Great many deputies argued that it would encourage capital outflow from the country. Deputies considered that the arguments on the need of liberalizing exports were exaggerated (estimated at around 1.5 million Lei) and that there were very few of those in Moldova who would take out of the country this type of goods. As those arguments were quite reasonable, deputies decided to reconsider the amount and considerably drop it during the next reading of the law.

March 8–14, 2004

Parliament convened only on two session during the aforesaid period, thereby engaging mainly in politics rather than legislative activity. As media outlets rightly pointed out political debates knew an apathy lately which was mainly due to the “coalition building” among centre and centre-right political parties initiated firstly by Christian Democrats and then taken over by “Moldova Noastra” Alliance. It’s hard to predict the outcomes of the negotiations especially since certain discord has already occurred among the participants to the negotiation table and even some of its long-term supporters left (see in this respect the declarations of the Centrist Union of Moldova and recent statements by Victor Selin — one of the sponsors of the Moldova Noastra Alliance). To conclude, legislature did more of a technical work during the aforesaid period and examined less important legal acts.

Law on Investments in Entrepreneurship

Currently investments are regulated by the Law on Foreign Investment passed back in 1992. The law protected and fostered only foreign investments and therefore was severely criticised by domestic businesses. They argued that they should enjoy a preferential treatment when investing at home and should not be forced to register joint ventures as to run businesses in the country.

The law passed by the Parliament provides legal, social, and economic principles of investment activity, investor’s rights and responsibilities, mandate of pubic authorities in the field, guarantees provided by the state to domestic and foreign investors, and procedures for joint ventures operation.

The law defines a number of terms and types thereof. Investments could have various forms:

The law also provides basic principles for investing:

  1. Freedom to invest;
  2. Non-discrimination of investments (investors’ equality);
  3. Transparency;
  4. Complying with the obligations undertaken (investor).

Also mechanisms of protecting investments are provided for:

Opposition parties criticised the last chapter on the grounds it were just nice words in reality though, they had not been backed up by adequate policies and investors were persecuted (Union Fenosa, Farmaco, Megadat, expropriation of “Dacia” hotel).

The law includes special provisions on foreign investors and foreign investments. Generally speaking, the law did not add any new guarantees or methods of fostering investors. The latter shall be included in the fiscal, customs, and property law. It only establishes the general framework, the foundation for the state policy on investments. The latter will be developed and enforced by the Government, in particular through the Ministry of Economy.

International acts ratified by Parliament

European Convention on transferring indicted persons and Additional Protocol to the Convention ratified by Parliament on March 11, 2004

Several reasons were cited in favour of the document, namely:

Political — protection is provided to citizens during the sentence and also to facilitate his/her social reintegration in their origin social environment. Also, a legal framework is established enabling other states to protect their citizens convicted on the soil of the Republic of Moldova, which would be saluted by European countries.

Normative — Convention does not breach rights or obligations provided for in the extradition and other international treaties that provide for the transfer of detainees.

Organisational — Ministry of Justices in the contracting countries would be responsible for enforcing the Convention and its additional protocol so as to co-ordinate transferring procedures.

Financial — Enforcing countries would bear the cost of incidental expenses. To cover those expenses (translation of documentation, transfer) special funds are to be allocated.

Other — once the law is enforced it is expected that a great number of applications will be filled to Republic of Moldova. Currently there is quite a number of Moldovan citizens convicted abroad who want to serve the sentence in their home country for various reasons.

Convention between Republic of Moldova and Slovak Republic of eliminating double taxation and prevention of fiscal evasion on income and asset tax

Convention for eliminating double taxation and prevention of fiscal evasion is intended to create fiscal systems that would exclude double taxation of legal and natural entities. The Convention is aimed at: eliminating double taxation, preventing fiscal evasion, sharing the right on taxation among contracting countries, eliminating fiscal discrimination under any for. The two countries signed the Convention so as to attract foreign investments, assist residents to place investments abroad and solve any fiscal litigation. Convention is based on the following principles:

To enforce the Convention the two countries would have to conclude a number of agreements and conventions.

Protocol on ceasing the Agreement on establishing an Eurasia Union “Coal and Metal”

In 1993 many of the CIS countries signed the Agreement on establishing an Eurasia Union “Coal and Metal” with an eye towards establishing favourable conditions for the efficient development of the coal and metallurgical industry and developing co-ordinated policies in the field.

After seven years of activity, several flaws and violations in the administration of funds by its leadership were found after a financial and economic evaluation. Most importantly, it was found out that Union didn’t fulfil the very purpose it was established for.

On September 19, 2003 leaders of CIS member states signed a protocol on its abrogation. Noteworthy, “Coal and Metal” union was one of the first institutions established in CIS to be liquidated and the process is likely to continue and this mainly due to CIS institutions inefficiency and huge costs, that after all not all the countries allocate.

Law on cancelling penalties and fines to rayonal thermo-enterprises

The law annulled the penalties and fines incurred by rayonal thermo-enterprises as of January 1, 2004. Their debt is estimated at 22.5 million Lei. Another 22.5 represent the fines and penalties. The enterprises have no chance whatsoever to pay the debts incurred, whereas by annulling them the state hopes to boost the sector.

Draft law on approving the regulation on the procedure of publishing and re-publishing normative acts and corrections to them in the Official Monitor

The regulation was developed so as to enforce the provisions of the Law on Normative Acts issued by the Government and central or local public administration. It includes provisions on publishing the normative acts, responsibility of the persons designated to edit the documents prior to publishing. It also refers to the procedure of republishing legal acts that undergone modifications or completions.

One of the goals of the law was to eliminate any possibility of operating changes to the edited and published normative acts, as well as to systemise the normative acts published in the Official Monitor of the Republic of Moldova.

February 9–22, 2004 March 15–28, 2004