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September 26, 2022

FinMin Teodorovici at the ECOFIN meeting in Brussels: Romania endorses common solution at EU level on digital services tax

Romania endorses the version of a common solution at the European Union level regarding the taxation of digital services, not the implementation of individual solutions of the member states, Public Finance Minister Eugen Teodorovici said on Tuesday at the Economic and Financial Affairs Council (ECOFIN) meeting in Brussels.

According to a release of the relevant Public Finance  Ministry issued  on Tuesday, Teodorovici pleaded for a coherent approach at global level and for the collaboration with the Organisation for Economic Co-operation and Development (OECD) on this topic, showing that the individual measures taken by member states might lead to the fragmentation of domestic market and the distortion of competition.

The European Commission proposal establishes a common system of a digital services tax on revenues resulting from the provision of certain digital service by taxable persons (hereinafter “Digital Services Tax” or “DST”). DTS would be charged for gross revenue from the provision of services falling under the scope of the tax, minus the value added tax and other similar fees. The single rate of DTS is 3 percent.

In respect to the directive draft regarding a common system of a digital services tax on revenues resulting from the provision of certain digital services, the Romanian Finance Minister reiterated Romania’s stance that endorses the efforts at the EU level for identifying a common and equitable solution for all member states.

“In the Ministers’ discussion, held prior to the ECOFIN sitting, also debated was the Annual Report of the European Fiscal Board (EFB) on the implementation of the EU budget. Minister Teodorovici argued that the European Fiscal Board proposal is useful for discussions on the functioning of the Stability and Growth Pact and mentioned that Romania endorses the idea of focusing the Pact’s implementation on observing the rules on public debt. In order to overcome the weaknesses and complexity of the current EU fiscal framework, the EFB proposes a radical simplification and clarification of the rules on fiscal governance. According to the EFB proposal, the reform of the Stability and Growth Pact (SGP) would require, in the first instance, the amendment of the EU secondary legislation, as well as the Budget Pact,” the quoted source mentioned.

According to the Public Finance Ministry, the key aspects of the EFB proposal for the SGP reform are: capping medium-term debt to 60 percent of the GDP – where the medium-term budgetary objective (MTO- the structural budget balance) will no longer guide the long-term budgetary policy; setting a limit on net primary spending (excluding revenue-based discretionary measures) for member states that record public debt levels above 60 percent of the GDP; a stronger sanction system – in the proposal, only sanctions for euro area states are specified: restricting access to the central stabilization function, suspension of European funds and fines; derogatory clauses for exceptional circumstances, which must be triggered on the basis of an independent economic judgment; simplification of the oversight cycle – adjustments and corrections to budgetary requirements should not be carried out each year in the case of minor deviations, but in the medium term (3 years) or in case of major deviations from the final target.

Public Finance Minister Eugen Teodorovici participated on Tuesday in Brussels in the meeting of the Economic and Financial Affairs Council (ECOFIN).

The meeting agenda included topics such as the digital services tax, the annual report of the European Court of Auditors on the implementation of the EU budget concerning the financial year 2017, conclusions regarding the EU statistics and conclusions on climate finance.

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