The Fiscal Policy Project for 2023: How much will tobacco and alcohol excise tax increase

The Parliament voted, in the first reading, the draft Fiscal Policy for 2023. The document provides for the increase of excise duties on tobacco products by 25%, and on alcohol by 15%. Previously, the business environment and business associations expressed their concerns regarding the accelerated increase in excise duties, citing that any unplanned and sudden increase will encourage illicit trade and cause losses to the state budget, writes Infotag.

In a public address, the main operators of the tobacco products market stated that the sudden increase in excise duties will affect the legal market and the companies that operate legally in the Republic of Moldova, will stimulate the growth of illicit trade and will decrease the budget revenues respectively.

In the address it is said that every 1% decrease in the legal market of tobacco products represents an estimated loss of 1.3 million euros or 26 million lei in state budget revenues.

It should be noted that the Ministry of Finance proposes to collect additional revenues of approximately 618 million lei from the excise tax on tobacco products to the state budget. Tobacco market operators believe that this will not be possible if the excise duty increases by 25%.

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Earlier, in an interview, the deputy director of AmCham Moldova, Veronica Sirețeanu, stated that the proposals for a rapid increase in excise duty rates must be correlated with another proposal from the Fiscal Policy: the 0 rate for profit. “This abundant growth, which is not healthy at all, is the cost that the budget would like to compensate for the non-application of the profit tax to legal entities”, emphasized Veronica Sirețeanu.

The Fiscal Policy for the year 2023 provides for a 3-year tax holiday for small and medium-sized enterprises, setting the income tax at 0% of the taxable income not distributed in the form of dividends. As a result of this measure, the budget will be reduced by 1.2 million lei.

And importers of alcoholic products stated that the increase in excise duty on alcohol by 15%, instead of 5%, will cause dire consequences, not only for importers, as an even harsher impact will be on domestic producers, and respectively it also leads to consequences for the final consumer.

“If we summarize what the impact would be – the increase in excise duty by 15% will lead to several negative consequences for both the population and the business environment, first of all, the exit from legal taxation and the shift towards the consumption of counterfeit products”, he stated Vitalie Slonovschi, administrator of the Global Spirit company.

The draft Fiscal Policy for the year 2023 is expected to be voted in the second reading.

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