Another amendment to the law on environmental pollution payments: Does the most powerful party is right?
InfoMarket agency comments
The law on environmental pollution payments formally became a ping-pong game between the authorities. Informally, it is a redistribution of preferences which the government traditionally gives to local producers (at least, declares it), in favor of importers. Several attempts have been made over the past six months to establish "fair rates" of so-called environmental charges, they’d apply to virtually all goods in the production of which the environment is polluted, but lawmaking was delayed, and businesses have suffered from such rapid changes.
It all began in late December 2016, when amendments to the law (effective since 1998) on environmental pollution payments came into legal force. Despite the fact that the document passed all necessary public consultations, the amendments caused different interpretations and difficulties in settlement of charges for packaging, for the sides, entrepreneurs and tax authorities.
The Ministry of Finance in cooperation with the Ministry of the Environment and entrepreneurs have presented new amendments to the law to rectify the situation, as early as of March 2017. The government has approved those changes, the parliament adopted them but the president of the country refused to promulgate the document and returned it back for revision, presenting its solution to the problem in the form of a legislative initiative. The government issued a negative conclusion to the initiative (published on Friday), describing detailed reasons it cannot accept the president's amendments and now, according to the current procedures, the bill which has been approved by the government in March will be sent once again to the parliament for an approval. Most likely, the deputies will accept it, and the Head of the State will have to sign it, finally, the document will come into legal force.
The collection rates will be changed from 0.5% to 3% as a result, depending on type of packaging. The average rate was 2% until 2017. The amount of fees is reduced and special reduction will be in case of import of products’ packaging and separately packaged multi-layer composite materials, plastic stretch film, aluminum foil, etc. The goods of solid consistency (imported to Moldova) are excluded from the environmental collection (including materials, machinery, equipment, components and spare parts) but aluminum packaging is covered by the environmental collection. Also, the collection tax applies to the products with a capacity of less than 1 liter or 1 kg.
The Association of Canning Industries "Speranta-Con" together with major manufacturers: Orhei-Vit, JLC, Gelibert and Aquatrade, made statements on the amendments last week. The representatives of local manufacturing companies believe that the latest revision of the law on environmental pollution taxes was the result of a lobby of importers. Local producers are sure that the current version of the law is harmful to the domestic producers, however it is very favorable for importers.
"The new rates suggest a significant reduction in fees for different types of packaging, depending on their volume, both plastic and composite packaging, also it includes new rates for packages of 0.1 liter and 0.5 liter. Thus, the fee for a composite material of a 1-liter package is reduced by 0.5 lei and the most common package with a capacity of 1 to 2 liters will be reduced by 1 leu per unit. The authors of the law failed to justify the need to reduce charge rates and they underestimated the negative consequences for the budget and national economy ", it was concluded by "Speranta - Con".
Indeed, the latest amendments are not very profitable to the budget of the country. So, the revenues of the budget on environmental pollution payments in 2015 amounted to 247 million lei; 272.2 million lei in 2016(an increase of 10%), then it is planned only 210.6 million lei in 2017(which is 22.6% less). The new law will lead to 25-30% reduction of environmental pollution charges. This is despite the fact that the share of goods on the shelves, packed in plastic and composite packaging, is growing every year. The goods imported from the EU and Ukraine will continue to push away local products. The "environmental fee" will be charged by the State Tax Service (but not at the border by the Customs Service) within the country now, according to the law.
The government has provided "iron arguments" on this matter. Referring to the demands of the WTO (Moldova is a member); the Cabinet assures that "with respect to the WTO members, there should not be less favorable conditions and tax treatment for WTO products rather than it is provided to domestic products." Imported products that crossed the border after paying customs duties and other taxes should be treated in the same way as domestic products.
Regarding the reduction of fees to the state budget due to the reduction of fees for environmental pollution, the increase in fees to the state budget at the expense of growth of prices for consumer goods is not desirable either for consumers or for the traders. " The government believes that a rise of prices can lead to a decrease in final consumption and consequently, the reduction of the collection of other more important taxes to the state budget, for example, VAT. At the same time, it is not clear: What is the price growth the government is talking about? The amendments adopted in December do not imply an increase in rates.
The Association of Beer Brewers and Water Producers of Moldova use aluminum packaging for their products, explaining that the charges for these types of packages will be ten times less than the budget lost by 30% due to a significant reduction in the rates of environmental charges. "We are not against free trade but every workplace is important and every enterprise is on the bill in this country, we still expect more than just lip service from the state," the Association believes.
In the meantime, the changes in the legislation are "frozen", importers will receive their money back if the law supported by the government comes into legal force; the importers have transferred according to some data, about 96 million lei this year, the money will be transferred to the debt of the budget to economic agents. There are also some economic agents who did not pay environmental fees this year, they were waiting for new amendments. It’s been six months already! It gives them obvious advantage over the local producers who have paid those fees. Will the production, which was imported during the last six months, be levied on environmental collection? Will the government and parliament resolve the situation in regard to imported products towards the domestic ones? These questions are still open. These topics are exactly what the local producers are worried about.
The Association of Foreign Investors considers amendments to the law "important for improving the investment climate in Moldova, ensuring equal conditions for all enterprises and business activities, as well as respecting the interests of end consumers." Foreign investors consider unsuccessful and speculative attempts by opponents of these legislative amendments to see them lobbying the interests of individual small groups of producers. "Keeping unreasonably high environmental levies on the packaging of certain types of imported products, stimulates unfair competition, due to the "tariff filters", emerging market advantages for certain producers in Moldova" - believe in the FIA.
It is known to InfoMarket agency, among the members of the FIA there is no unified position and some of them were unpleasantly surprised by the statement on behalf of the FIA, speaking about aluminum containers, for example, the tax collection (in accordance with the proposed changes) will be applied only to the liquid content of any consistency, at the same time canned products that are not liquid will not be taken into consideration, but liquid products packed in aluminum packaging considered to be harmful to the environment. It turns out that local producers of canned products will pay environmental fees for aluminum packaging, but the importers will not. The same story with Tetra-Pak packaging, the tax will be applied if there is liquid in it, and it will not apply towards sugar (it is not liquid) for example. Is it possible to talk about equal conditions for all economic agents, local producers and importers?
It must be acknowledged that local producers are raising another long-term priority issue. Today, there is no effective waste management system; any packaging represents a source of environmental pollution. It is obvious that the immediate decisions of the authorities do not solve the country's environmental problems, on the contrary aggravate them. After all, more than 2.5 billion lei received from the environmental fees payments within 10 years were not used for the relevant needs. Thus, the country still does not have a garbage processing plant and there are no plans to implement this idea. Who and when will develop and provide a plan for using the money from the environmental fees to improve the ecology of Moldova, ensuring the targeted use of the collection? ...Why introduce the collection if the funds are misused? Is it because there is a need-to-close-the-hole in the budget? Even so the puzzle does not work after all, the latest amendments lead to the decrease of revenues to the budget...
Again the unequal battle will continue, domestic companies clearly have no advantages. Is it worth waiting for some other solutions in this area? No one will be held responsible for the recent hasty decisions, so the pitch for experiments with businesses is open. // 27.06.2017 - InfoMarket.