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PwC recommends fewer taxes

Romania stands better than the European average as to the number of hours required for meeting tax legislation demands, according to a survey.

Romania ranks second-from-bottom among EU members in terms of tax easiness and 149th of 183 global economies examined over this indicator, according to a survey by Price WaterhouseCoopers (PwC) and the World Bank.


‘Romania stands better than the European average as to the number of hours required for meeting tax legislation demands, an annual average of 202 hours, from the European average of 232 hours, Unfortunately, this is offset by the large number of payments a medium company shall make throughout a year, no fewer than 113, of which social contributions make the bulk, which ranks Romania 182 of the 183 economies surveyed,’ Peter de Ruiter, Partner, Tax and legal Services Leader, PricewaterhouseCoopers Romania. Romania ranks 26th out of 27 EU members, only exceeded by Poland with respect to bloated tax paying processes. The yearly average number of tax payments by a standard company worldwide comes to 31, which means the number of taxes paid in Romania is nearly four times higher.


Romania nonetheless made headway as to the overall tax rate, which measures the percentage rate of tax spending from before-tax profit, down from 48 per cent to 44.6 per cent, which puts it within the European average.


‘We should say that Romania’s position this year is due not so much to local market involutions but to other economies several tax regime reforms,’ Peter de Ruiter said, who recommends that Romanian authorities should cut the number of taxes, eliminate all the small taxes, improve regulations toward leaner and clearer laws, avoiding frequent changes in tax legislation, quick VAT reimbursement, VAT payment shortly after invoices are received and more incentives for professional training. According to the survey, while 20 states have cut the profit taxes for companies, 18 have simplified the tax payment procedures. On average, in all the 183 economies evaluated in the report, a company must make 31 payments and needs 286 hours for the calculation and payment of the taxes.


The results show that the profit tax paid by the companies is just one of the numerous contributions that a business must make. On the average, a company pays 9.5 different taxes, and the profit tax represents only 12 per cent of the payments, 26 per cent of the time required for the fulfillment of the requirements of the tax legislation and 38 percent of the cost of the taxes.


VAT growth, easiest solution to increase revenues to the budget


The VAT growth would be the easiest solution to increase the revenues to the budget, but such a measure would stir inflationary pressures on short term, Peter de Ruiter also declared.


“If the authorities raise the VAT, the increase would not be very significant, 2-3 percentage points, and will not affect the position of Romania in the classification regarding the facility to pay the taxes. In a general business climate, the growth of this tax will conduct to the rise of inflation on short term. It is one of the taxes that could be the easiest to increase,” Ruiter said in a press conference. However, the PwC official pointed out that such a decision must be analyzed by the Romanian authorities.


On another hand, de Ruiter mentioned that he disagreed with the introduction of the minimum tax, showing that such a measure did not have a positive impact on the business circles.


In order to improve the collection of the revenues to the budget, the PwC official recommends a simplification of all the administrative conditions, less ambiguous and clearer laws, and to improve the qualification of the employees from the Ministry of Finances and ANAF.

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