How to Tax Real Estate Property in Moldova?

Until recently, revenues from property taxes throughout Moldovan cities and villages were merely symbolical and represented an extremely small share of already meager local budget revenues. A property tax reform, initiated in 2003, intended to change this situation.

Firstly, all residential properties (so far, in cities only) were re-assessed so as to reflect their market value, considering a multitude of factors like location, condition of apartment building and availability of residential infrastructure. Owners of apartments and houses were informed about the re-assessed value of their property and given the opportunity to petition the decision. Only in Chisinau Municipality, about 190,000 apartments and 28,000 single-family houses were re-assessed.

Secondly, Section VI on Real Estate Property of the Fiscal Code was recently modified. For Chisinau, the tax rate was set at 0.02% of the re-assessed value of taxable property. All other municipalities should set their own rates (0.02% being the minimum allowed), so as to achieve an average increase of 10% in revenues from this particular tax compared to the previous year. For large properties (with surfaces comprised between 100 and 200 square meters), the tax rate is 3 times bigger, and for very large real estate (more than 200 square meters), it is 28 times bigger.

What will be the real outcomes of these policy measures? According to a rather good article in Economic Overview, the impact of these changes, particularly on municipal governments, the ultimate beneficiaries of this reform, has not been calculated. Judging by the extremely small number of transactions on the real estate market, (543 sales, 483 donations, and 346 inheritances in Chisinau in 2006), and a large number of social categories that are exempt from this tax, the municipal budget will fail to incur the much-needed revenues. Theoretically, the tax revenues that could accrue from 9,000 very large residential houses located in Chisinau could make a real difference in the municipal budget. However, experts are rather skeptical because it is obvious that these well-off owners might prefer to experiment with various tax avoidance loops.

What's Wrong with Moldovan Media?

Just as I was wondering whether to write or not about my own frustration and disappointment with Moldovan media and journalists’ professionalism, I visited Sandu Culiuc’s blog where he addresses a similar issue. His story is that a well-respected media agency, Infotag , used some information from his blog to make a news article, distoring his name, position and the key message of his blog post. Furthermore, that article was distorted even more by a local news portal Moldova Azi

My story is not so personal, but just as outrageous. Since my return to Moldova, I’ve been professionally involved in regional development policy making, so I believe I’ve had time to develop a pretty good understanding of the situation in Moldova. According to my own assessment and given the current political, economical and social circumstances, the progress is significant. In this sense, I was pretty surprised when I came around this article in Logos Press, which gives a completely erroneous description of what’s going on in regional development in Moldova. Based on this example, I question the professional quality of the journalist who published this article, and consequently, the newspaper as a whole. If everything else in this newspaper is as true as the facts in this article, then I guess I won’t be reading it seriously any longer.

How Open is Moldovan Higher Education to Innovation?

I successfully completed the Muskie Program – a program designed to provide young professionals from the NIS countries with graduate American education and financed by US Department of State. I returned to Moldova, my home country, with the aim to find a job. Open Society Institute (OSI) – one of the organizations that co-sponsored this program offers the 2006 Muskie graduates an opportunity to apply for a grant to develop and teach a course in a higher education institution. At first this seems like a great idea. However, the truth is that the highly centralized system of higher education in Moldova is so rigid that teaching a new course to undergraduate or graduate students is almost impossible. All existing courses are part of an officially approved Course Plan, so introducing a new course is very difficult. Secondly, the existing courses are primarily being taught by PhD graduates, which is common everywhere. The competition for vacancies to teach these existing courses is fierce, which is again, very common, particularly in Europe.

This situation shows how difficult it is for innovative thinking (in the form of new, challenging, interdisciplinary courses) to get through and be accepted in the Moldova higher education system.

According to an article by Ralph Darendorf in Logos Press (16 June, 2006), European universities have several important weaknesses, such as conformity, limited diversity, freedom and accountability, a reduced level of ambition, high level of bureaucracy, and insufficient financing. Darendorf argues that the only way universities in Europe, Japan, Southern Korea, China and India can progress is to increase their level of flexibility and openness. I agree with this view, and based on my own experience, believe that Moldovan and Romanian universities could learn a lot from American universities by opening their doors for professionals like me who studied abroad and are willing to act as agents of change and innovation.