Senate adopts the split VAT

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Serban Nicolae: At this time, it’s very hard for us to say if the measure is good or bad, if it will have negative or positive consequences

 

The plenum of the Senate adopted on Tuesday, with 54 “pros” and 45 “cons”, the law approving the ordinance on the split VAT, which provides, in its new form, that the split VAT payment will be mandatory only for the companies in insolvency or who register delays in paying this tax. Also, companies willing to opt for this measure will receive a 5% exemption from the profit tax.

According to the new regulations adopted by the plenum of the Senate, “the obligation to open and use at least one VAT account belongs to the taxable persons registered for VAT purposes (…) in order to collect and pay VAT, as well as to the public institutions registered for VAT purposes (…) in order to collect VAT, which are in at least one of the following situations:

  1. a) on December 31, 2017, they register overdue fiscal obligations representing VAT, excepting those for which payment rescheduling was obtained, higher than: RON 1,500 for large taxpayers, RON 1,000 for medium taxpayers, RON 500 for small taxpayers and RON 100 for individual taxpayers;
  2. b) starting from January 1, 2018, they register overdue fiscal obligations representing VAT older than 30 days from maturity, except those for which payment rescheduling was obtained, higher than: RON 1,500 for large taxpayers, RON 1,000 for medium taxpayers, RON 500 for small taxpayers and RON 100 for individual taxpayers;
  3. c) are subject to national laws on insolvency and insolvency prevention procedures”.

 

Those who are willing to opt for the split VAT payment can waive this mechanism at the end of the fiscal year, but no sooner than one year since the measure started to be applied to them.

Companies who are subject to the law on the split VAT payment, namely those who registered delays in the VAT payment or who are in insolvency, can waive this measure within six months since they are no longer in that situation.

Also, companies willing to opt for the split VAT payment will benefit from two facilities. Firstly, they will receive 5% discount for the payment of the profit tax corresponding to the 4th quarter of the 2017 fiscal year. Secondly, the delay penalties of these companies corresponding to the main fiscal obligations representing VTA, overdue at September 30, 2017, will be deleted.

The report on the adoption of the law was adopted on Monday evening by the Budget-Finance Committee of the Senate with 5 “pros”, 2 “cons” (PNL and USR) and one abstention (UDMR).

Senate is the first notified Chamber in this case, and the Deputies’ Chamber will be the decisional body.

At the general debates in the Senate’s plenary session, the opposition criticized in the lump the measure regarding the split VAT payment.

PMP Senator Traian Basescu explained that the normative act introducing the split VAT will not solve the tax evasion problem because, he explained, tax evasion is not caused by the companies who are known as VAT debtors, but by companies about we don’t know anything.

“I believe we are going to make a mistake with amendments. The government proposed us a mistake without amendments. This split VAT measure shouldn’t exist in the Romanian indirect tax system. I would like to ask the Finance Minister: how many Romanian companies will be subject to the split VAT measure? Do you have an answer, an assessment? The second question: how many of those who are obliged to register in this split VAT are companies who cannot pay VAT because the Finance Ministry delayed the VAT reimbursement? I believe it’s a hasty measure and I’m calling my colleagues who are senators who know more or less what’s going on in Romania’s economic life, to vote against this initiative. This is not the way to fight against tax evasion, but we should look for those who are not registered anywhere” Traian Basescu stated in the Senate’s plenary session.

USR Senator Nicoleta Dinu made a call to all the senators, regardless of their party, to vote against the split VAT.

“Ordinance no.23/2017 proposes an experiment designed to cancel the progresses and to disqualify Romania as a destination for future investments. We confess that we adopted a pragmatic position in the report committee, trying, by the debated amendments, to improve the background of a law with disastrous consequences on the Romanian economy and thus to diminish an imminent evil as much as possible. The consolidated form of the draft law with the approved amendments is still unconvincing. The positive consequences related to the VAT collection will remain modest, compared to the anticipated losses regarding the future business development” Nicoleta Dinu stated.

“To ‘optionally’ eliminate the evasion seems to me a little bit strange, but that’s it. This is PSD’s today option (…) This split VAT measure was criticized not only by us, the opposition, but also by businessmen who are working with the state today (…) Today we are trying to change a system, to blow a country, for an 8% difference of voluntary compliance. Not at last, and PNL will vote against this option for this reason, this option punishes exactly those who have problems: companies who are in insolvency, companies having payment problems or having delays for more reasons, are those who are forced, are obliged by this ordinance and this law, to open a VAT account, which means costs for these companies. How can you attract more money from the companies, when you make them cost more?” stated in his turn the PNL Senator Florin Citu, according cu news.ro.

But the Social-Democrats defended the measure, saying that it will reduce tax evasion, even if we don’t know if the measure is good or bad.

“At this time, it’s very hard for us to say if the measure is good or bad, if it will have negative or positive consequences, because it wasn’t applied before. Both versions are speculations. We hope we’ll strength the budget discipline and the budgetary resources attracted to the state budget at the time when they are owed.” Stated the leader of the PSD senators, Serban Nicolae.

He added that if necessary measures would have been taken until today, and if Romania wouldn’t be on the last place in collecting the stated VAT, perhaps this measure wouldn’t be necessary. “But unfortunately, we accumulate every year billions of euros as sated and uncollected VAT, with the current proceedings”, he also said.

“This ordinance was necessary for the improvement and the health of the business environment (…) All we are trying is absolutely to make the economic factors to be a correction for the state budget. This is all we are trying (…) It’s a measure to close tax evasion” said, in his turn, the PSD Senator Nicolae Badalau.

The UDMR senators also criticized the split VAT measures, announcing that they will vote against it.