On September 28, 2023, the Parliament submitted a set of draft amendments to the Education Code and the Fiscal Code for public consultation. The amendments propose to include public educational institutions in the list of possible beneficiaries of the percentage designation mechanism. This is meant to eliminate informal payments, which educational institutions have been collecting. Further, the draft amendments would require all non-commercial organisations (including foundations and parent associations) whose goal is to support the development of educational institutions to either cease all activities or amend their statutes by carrying out activities other than providing financial support to educational institutions (within 9 months of the adoption).
The draft provoked a strong reaction from many CSOs who signed a joint Appeal to the Parliament, arguing that the percentage designation mechanism is an instrument for financial support of non-commercial organisations, and not for public institutions. The Appeal also states that the draft provisions on the forced liquidation of non-commercial organisations violate the right to freedom of association and are unconstitutional.
The latter provisions that go against the Constitution and provisions of the Law on non-commercial organizations 86/2020, will most likely be withdrawn from the draft, as suggested following the public consultations held on 17.10.2023.
However, the debate regarding the inclusion of public institutions in the list of percentage designation mechanism is far from over. Given the choice to redirect 2% of their income tax to either schools or CSOs, parents are likely to opt for schools, leaving CSOs without this source of income. At the same time, other sources of income, such as philanthropy, are underdeveloped and lack the necessary incentives for potential donors, an issue which should be the focus of decision-makers.
Moldova introduced the (2%) percentage designation mechanism in 2017, for the benefit of non-commercial organisations. While the mechanism has had a positive dynamic since the beginning, the record number of designations it reached was in 2022 when about 2.5% of physical taxpayers (35,000 contributors) designated roughly 0,5 million Euros. From the very beginning, the mechanism faces challenges as a significant part of the resources is given to associations affiliated with public institutions (associations of former employees of the Ministry of Interior, State Tax Service, General Prosecutor’s Office, Ministry of Defence). The current proposal to include public schools and educational institutions would further undermine the original intention of the policy, which was meant to provide vital income to non-commercial organisations.
Additionally, from 2024, designations will only be possible electronically with the use of electronic signatures, which is likely to lead to a decrease in the number of contributions, as was the case during the pandemic, when taxpayers did not physically go to the counter for the formalities related to income tax declaration.
In the current situation, it is also disappointing that the amendments were not consulted with CSO representatives in advance within the Platform for dialogue and civic participation created in June 2023.