New, lower income tax: 10% flat tax approved by PMR Parliament

More money to spend: Consumers in Pridnestrovie now pay just 10% income tax

TIRASPOL (Tiraspol Times) - In its first reading, July 13, Parliament in Pridnestrovskaia Moldavskaia Respublica approved new lower tax rates for the emerging but unrecognized country.

Previously, the nation taxed incomes for physical persons at 15%, but starting next month the rate will be just 10% flat. At the same time, workers who earn less than $100 per month are considered low-income earners and guaranteed complete freedom from any kind of income tax.

The new tax legislation was introduced as an initiative by parliamentary chairman, Speaker Yevgeny Shevchuk. In approving the new legislation, Pridnestrovie's lawmakers looked to other countries in order to follow standard international practice:
" - This practice has been standard in other countries for a while now. In a number of nearby countries the tax rate on low incomes, defined as less than 80 or 100 dollars per month, is zero," Shevchuk told the press.

With the new lower tax rates it is estimated that the budget of Pridnestrovie will lose $18 million yearly, a loss which Parliament hopes will be offset by increased growth rates in the economy.

Market-based economy

Since its declaration of independence on 2 September 1990, Pridnestrovie has gradually transformed itself from a post-Soviet system to a free, Western-style market based economy.

In the process, it has found that a flat tax provides the best incentives for citizens and investors alike. Hoover Institution political scientist Alvin Rabushka points to a number of different countries in the former Soviet bloc that have adopted some form of flat tax in recent years. In addition to Russia, Pridnestrovie and Slovakia, they are Romania, Georgia, Estonia, Latvia, Serbia and Ukraine. He predicts that Poland and the Czech Republic will soon join them.

Unlike neighboring Moldova, called a "failed state" by local civic groups and foreign observers alike, Pridnestrovie is an industrialized economy which is viable on its own. The unrecognized country, which is currently seeking international integration, is also known as Transnistria.