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May 26, 2020

PwC: Tax collection rate in Romania much below EU level

Finance Ministry is working on a simplified taxation system for SMEs. An analysis for reducing Social Security contributions and will identify fields in which companies with turnover below EUR 65,000 operate.

The rate of tax collection in Romania is 75-80 per cent, much lower than in other EU member states and growing it to 90 per cent as in Spain would make fiscal environment look different, said Peter de Ruiter , partner at PwC audit and consultancy firm, at a conference organised by Ziarul Financiar and PriceWater Coopers, Mediafax notes. Peter de Ruiter also said a paradox of fiscal simplification was that such action would lead to a higher fiscal burden. ‘A high tax rate is not a hurdle to businesspeople. In Sweden they have high tax rates, yet the business environment is supported. Issues are less serious in Sweden than they are in Romania. Fiscal rules must be simplified even if that leads to higher taxes’, de Ruiter further explained. He also pointed out that the administration needed to be credible and noted in Romania there was no partnership between the Government and administration.During the same conference, Finance Ministry Secretary of State Dan Manolescu said checks would be done to see in which areas companies with a turnover of less than EUR 65,000 set to pay tax on revenue operated, an option being to set a fixed tax according to activity. ‘If we don’t know how many economic operators there are and in which sectors they operate, we cannot determine the best way to design the fixed tax’ Manolescu said. He explained the reason why the Government decided to reduce the maximum level up to which microenterprises are taxed on their revenue from EUR 100,000 to EUR 65,000 – that it should be equal to the threshold set for VAT, which is still EUR 65,000. Manolescu also explained the VAT threshold could not be elevated to EUR 100,000, as it had been negotiated with the European Commission. Authorities have already taken steps towards changing legislation on accounting reporting in order to raise the EUR 35,000 cap to EUR 65,000. On the other hand, the secretary of state noted that, as it was, the tax on Romanian microenterprises does not totally correspond to what happens in the European Union. Romanian authorities need to find ways to correlate local situation with the European landscape, while also incentivising small entrepreneurship. The Finance Ministry will soon proceed to an analysis in view of reducing social security contribution rates most likely from 2014.

All Fiscal Code provisions and updates to be compiled in new act

One of the various objectives the Ministry of Finance has for this year is to compile and structure all Fiscal Code provisions and updates in the last eight years, in correlation with relevant normative acts, into a single document. In what regards the work of ANAF, he reminded of an existing World Bank supported project for the restructuring and modernisation of the tax authority, pointing out that the fiscal administration part was even more important than the area of legislation. ‘No matter how good the law is and how well we put it together, if the administration side does not perform and the implementation of legislation is not good, it’s useless to have good laws’, Dan Manolescu also said.

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