“The Zero Rate” Must Be Continued

Editorial Note: This article is written by Dumitru Alaiba, former Deputy Prime Minister and Minister of Economic Development and Digitalization and current member of the Supervisory Board of the National Bank of Moldova. It is part of Moldova Matter’s new series “The Next Economy: Moldova 2030.” We’ve asked experts, business leaders and economists from a variety of backgrounds to share their vision for how Moldova can develop a stronger economic future. Most articles will focus on one big idea towards this end.

In recent years, amid global instability, Moldovan companies have visibly intensified their investment activity.

This has increased firms’ capitalization. Private investments, which have been rising for six consecutive quarters, contributed positively to GDP, by +0.9% in 2024. And the state did not “lose” money from the budget; it merely postponed part of the revenues, amounting to 800 million lei.

This is not an “investment boom,” but it is a healthy direction. It is an economy learning to grow through investment, not consumption, and helping companies become stronger. Strong companies invest to produce and export more, pay more taxes, and offer higher wages to employees.

Introduction

The Moldova Growth Plan, supported by the European Union, has the ambitious objective of doubling the Republic of Moldova’s economy within the next decade. To achieve this goal, a significant part of the Reform Agenda focuses on increasing the private sector’s capacity to invest in expanding businesses, raising productivity and production capacity, improving competitiveness, and strengthening resilience to shocks.

The quality of this growth is equally important. Even an economy driven by consumption and remittances can show apparently favorable developments in key macroeconomic indicators — including GDP. However, the Republic of Moldova has committed to achieving qualitative and sustainable economic growth, where investments—not consumption—are the main driving force.

For three years, Moldova has tested a tax model for Small and Medium Enterprises (SMEs) in which corporate income is taxed only upon the distribution of dividends (referred to below as the “zero rate”).

The positive results of the first three years suggest stable growth in private investment, a positive contribution to GDP, accelerated SME capitalization, increased liquidity in the private sector, and an overall boost in productivity.

In recent years, investor sentiment has been negatively affected by multiple crises generated by external factors: the pandemic, the inflationary wave, energy shocks, two devastating droughts, the war in Ukraine, the refugee crisis, as well as ...