Expert Group analysis: Should we limit the duty-free regime?

According to the current legislation of the Republic of Moldova, duty-free shops represent licensed shops, located in international airports, on board aircraft or at international state border crossing points, where goods are retailed, under customs supervision, to persons who are on international travel, say the experts.

The placement and sale of goods in the duty-free store located in the departure area from the territory of the Republic of Moldova is carried out without charging import duties. However, to shops located in the area of ​​entry into the territory of the Republic of Moldova, these facilities do not apply from 01.01.2020. Also, according to the new Customs Code that will enter into force from 01.01.2023, duty-free shops will no longer be able to be located at land crossing points of the state border.

According to the proposed amendments, the placement of goods in duty-free shops is excluded from the list of special customs regimes, the section of the Customs Code that defines and describes the activity of duty-free shops is repealed, the VAT and excise tax exemptions provided for these shops are removed from the Fiscal Code, and from the Law on the customs tariff – exemption from customs duty.

“The argumentation of the need to develop the above-mentioned draft normative act, formulated by the authors in the informative note, includes a series of valid considerations. (…) The project’s argumentation also includes references to some aspects that, on closer examination, do not support its cause and omits other relevant aspects. Thus, the authors denounce the unfairness towards ordinary traders who do not benefit from the duty-free status and are not exempted from paying certain taxes and duties. (…)


Another objection of the authors of the project to duty-free shops is that, despite the exemptions, the prices in them are not noticeably lower than in other shops. Without confirming or denying this situation, in the absence of statistical data, we can evaluate the causes that may contribute to such a state of affairs. The popular expectation is that the prices of goods at duty-free shops will be lower than at regular traders by roughly the amount of the exemptions, but the relationship between prices is not simple.

The prices of goods at duty-free shops are influenced by several factors, including prices from abroad, i.e. from other airports to which passengers fly, as well as the presence of domestic competition. (…) We can conclude that the problem that needs to be addressed is not the duty-free regime per se, but the need to develop a healthy competitive environment in the Republic of Moldova and to improve the capacities of state institutions in order to ensure a business climate favorable to competition.

Another argument against duty-free shops is that they can be a significant source of smuggling. It should be mentioned here that the efforts made previously, such as the elimination of duty-free shops from the entry area into the territory of the Republic of Moldova, as well as the exclusion, starting from 01.01.2023, of shops located at land border crossing points from the duty regime -free, means that the mentioned problem is mostly solved, because the airport territory is a relatively easy space to control. (…) In order not to admit contraband through duty-free shops in the airport, it is enough to apply the existing regulatory framework and to continue efforts to discourage corrupt behavior within the customs administration”, the analysis states.

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