Natalia Virlan and Dr. Gary Mckinnon, Business Management

The constant honest tax payment by every citizen and firm of the country is a serious problem, which arose in the Republic of Moldova (an ex-member of the Soviet Union) after the collapse of the Soviet Union in 1991. Since then until the present time the tax evasion by physical and juridical persons has not stopped or decreased, and the government does not know when it will.

The purpose of my research was to find out how well the citizens of Moldova know what the tax is and what are the causes of the tax evasion. The research consisted in questioning 100 citizens of the age 18 and up and interviewing the representatives of 4 firms different in their activities. After the surveys have been analyzed, I have come up to several conclusions:

1. Only 10% of all the respondents know more profoundly the definition of the tax and which taxes have to be paid, 20% – do not know the definition of the tax, and 70% consider taxes to be utilities.
2. Of all the taxes the citizens pay only 1/3 of them.
3. 98% answered “No” to the question if people pay all the taxes.
4. 100% consider the taxes in Moldova to be extremely high.

During my discussions with several respondents I saw their unwillingness to solve the problem of tax evasion. They blame the government and other local authorities for being so indifferent to the economic situation in the country. They consider that the government itself corrupts every sphere of the economy. This is not a secret. Probably the citizens would want to change this, but either they cannot or are afraid for their lives. I have expected the respondents to be a little bit optimistic about the responding to the questions, but some of them did not want to fill out the surveys because of the fear to express their true feelings about this topic or they did not know the answers to all the questions. I was a little disappointed and surprised. Finding other persons, such as friends and acquaintances solved this problem.

It is known that the citizens of the Soviet Union were not well informed of the taxes, since the respondents of the age 40 and up did not know the notion of the tax. During the time that Moldova was part of the Soviet Union only the employers in the administration of the state organizations used the notion of the tax. This was one of the politics of the Communist Party, which has led to the irresponsibility of the citizens before the state. After the collapse of the Soviet Union, all the accumulated money of the state (Soviet Union) budget has disappeared or as everyone considers has been stolen by the leaders. Later this has been detached as the “Shadow Economy” or “Hidden Economy”. It is known that the country will not prosper until the economy is 99% “Shadow Economy”. Since the budget is low, the wages are low too. This leads to many strikes, because the main responsibility of the citizen is not respected which is honesty. Few of citizens know that the state budget is consisted of the taxes, which have to be paid by them. Others who know this care less about it, since the money is not used correctly for the benefit of the country.

For many firms hiding the income is a usual thing, which they do every day. They would rather pay the bribes, than extremely high taxes. Those presidents of the firms are “lucky” who have relatives or friends in the Tax Inspection Department. Even though this department has undergone many changes in this activity, such as reduction of the employers, imposing high penalties for completing incorrectly the balance, the tax evasion by the firms has not decreased. However, 2 representatives of the firms have told me that they do not evade paying all the taxes, because the penalty for not doing this is higher. Other 2 manage to hide their real income from their activities. For example, one of them is construction firm. Every year it shows only one object (house or store) on the documents and it pays the taxes according to this only object. In reality this firm constructs every year many more objects, even for people as ministers. This example shows one more time how the economy in Moldova is corrupted. To the question “What the government should do in order to decrease tax evasion”, respondents and interviewees have answered: to increase salaries or to lower taxes.

As it was mentioned before, the people consider the government of Moldova corrupted, which means that the money from the state budget are not being used for the benefit of the country and people. Therefore, people follow the example of the government, being dishonest as the government itself is. They will not change their behavior toward the government until the government changes its behavior toward the citizens.

This research has shown me one more time how important it is to inform people about the significance of tax payment. It was not a surprise to read the same answers to the questions. It shows me that most people know how serious is the problem of tax evasion in their country, but they cannot do anything about changing this situation. The whole economy is changing with the leader. Overall, it was a great learning experience, and there is a lot to think about the situation in the Republic of Moldova. Hopefully, in the next 10 years the number of tax evasion will decrease.