Moldova Advances Risk-Based Tax Reforms to Strengthen Revenue Collection

Moldova's State Tax Service is in the middle of a major transformation aimed at modernizing how the country manages tax compliance. Backed by the International Monetary Fund's Fiscal Affairs Department and supported through the Global Public Finance Partnership funded by the European Union and other international partners, the reform program is designed to bring Moldova's audit practices in line with international standards.

The reform plan runs from 2025 to 2029 and is built on a detailed action program covering 23 initiatives and 175 specific steps. These reforms touch nearly every aspect of the audit function, from legislation and staffing to risk management and performance measurement. Importantly, this is not just a strategy on paper. Implementation is already underway, and progress is being tracked quarterly through a structured monitoring system led by a Steering Committee within the tax authority.

Early Signs of Real Progress

The first results are already visible. One of the most notable improvements is in value-added tax refunds. Processing times have dropped from 30 days to 22 days. Even more significantly, 40 percent of refund claims are now processed without a full audit because they are identified as low risk. This means businesses are receiving refunds faster while the tax authority focuses its resources on higher-risk cases.

Staffing, which had previously been a serious challenge, is also improving. After successfully requesting the removal of a hiring ban, the State Tax Service launched recruitment campaigns targeting universities and professional institutions. These efforts have brought in new candidates for audit roles and strengthened internal capacity. Filling audit vacancies is critical, as well-trained auditors are essential for detecting non-compliance and protecting government revenue.

Smarter Rules and Fairer Penalties

The reform agenda also includes important policy changes. One proposal under discussion is the introduction of a voluntary disclosure program. This would allow taxpayers who made mistakes in the past to correct them before being selected for audit, potentially with reduced penalties. Such programs are common in other European countries and can encourage taxpayers to come forward voluntarily rather than wait for enforcement action.

Another major proposal is to introduce graduated penalties. Instead of applying the same penalty in all cases, sanctions would vary depending on the seriousness of the offense. Honest mistakes could result in lighter penalties, while repeated or intentional evasion would face stronger consequences. This approach aims to balance fairness with deterrence, encouraging compliance without being overly punitive.

Rethinking How Taxpayers Are Grouped

One of the most important reforms under review is taxpayer segmentation. Currently, beyond the Large Taxpayer Office, most taxpayers are grouped simply as legal entities or natural persons. With more than 1.6 million taxpayers in the system, this broad classification may not be detailed enough to manage compliance effectively.

The reform team is considering dividing taxpayers into clearer segments, such as large, medium, and small businesses, and possibly creating a special category for high-net-worth individuals. This would allow the tax authority to better target its efforts. For example, analysis shows higher non-compliance among small businesses with a turnover below MDL 800,000. By focusing more closely on this segment, the tax authority could improve results.

High-income individuals are another area of concern. Recent audits have produced limited additional tax, suggesting that more advanced techniques may be needed, especially those that examine accumulated wealth rather than only declared income.

Building a Modern, Risk-Based Administration

Beyond policies and segmentation, the State Tax Service is also reviewing how it is organized internally. Managers currently supervise large teams, which may limit their ability to provide guidance and oversight. A planned time study will help determine whether workloads need adjustment. There is also discussion about separating headquarters functions more clearly from operational roles to improve accountability and efficiency.

These reforms are taking place as Moldova moves closer to European integration. The government has introduced broader inspection reforms across public institutions, and officials are working to ensure that the tax authority's risk-based approach remains protected and effective.

International coordination is playing a key role. Alongside the IMF, the US Treasury's Office of Technical Assistance and the Swedish Tax Agency are supporting different aspects of the modernization effort, from compliance risk management to training and digital systems.

If the momentum continues, Moldova's tax authority could emerge as a stronger, more data-driven institution. The goal is simple but ambitious: increase compliance, reduce unnecessary burdens on honest taxpayers, and collect revenue more efficiently. In doing so, the reforms aim to strengthen public trust and support Moldova's long-term economic and European aspirations.