“In the industry we are representing, the profit margins are extremely narrow due to the tight competition and the profits usually stand below 2%. Therefore, if the 0.5% share of turnover will be enforced, the income tax will not remain 16%, but increase to 30-40%”, reads the press release remitted by Association of Telecommunication and IT Equipments Producers and Providers (APDETIC).

Moreover, considering the 20-25% reduction in sales projected for this year (optimistic view), the 0.5% tax will lead to the bankruptcy of certain companies or sharp contraction of activity to other in order to cope with the tax levied by the state and not with the poor market conditions. In return, this will result in a shortening of the taxation database, reads the press release.

The Association, who encompasses 80% of the Romanian IT marketplace, says the consequences of the poll tax, a mere trifle to European medium and large companies, will consist in activity cutbacks, layoffs, and the increase of prices.

The offshore companies will also be favored. They will directly ship from abroad without bearing the burden of the national tax laws, while IT workers will end up losing their jobs and currently-levied income tax will eventually be abolished.

As for the non-deductibility of expenses related to auto park, APDETIC says the importers and vendors will fail to develop or distribute any further, namely they will be unable to run the inherent and core activities.

The delivery of the products to the buyer together with the field forces bring a significant contribution to the growth of their turnover and hence, profit. The absurd measure to decide that only transport and taxi companies can deduct their expenses will lay the groundwork of an arbitrary economy, where tax collection is always narrow, and people lose their jobs.

The IT association requests, in an open letter to the minister of finance, Gheorghe Pogea to review the negative consequences, both to economy and IT industry and to state budget of the announced tax policy measures – it will spur the underground economy, weaken the companies’ activities or even send them on the verge of collapse, cut workforce, contraction of taxation database - and to adjust the legislative propositions to the realities of Romanian marketplace.

APDETIC members account for 80% of the local IT industry: Asesoft Distribution, Canon CEE G.M.B.H, CG&GC Intelligent Technology, Complet Electro Serv (Altex), Flamingo Computers, Fujitsu Siemens Computers, Hewlett-Packard Romania, IBM Romania, Intel Romania, K Tech Electronics, Omnilogic, Panasonic Romania, Proca Romania, R.H.S. Company, SCOP Computers, Tornado Sistems and Xerox Romania.

According to the draft law, the companies with a turnover within 0 and 52,000 lei range (nearly 12,000 euros) are due to pay a minimum annual share of 1.467 lei (341 euros) or 183.3 lei per month as of May 1.

The businesses with annual turnover within 52,001 and 215,000 lei range (50,000 euros) will pay a minimum corporate tax of 2,867 lei and 4,300 lei (1,000 euro) in 2010. The companies closing year with a turnover between 215,001 and 430,000 lei (100,000 euros) will pay 4.333 lei this year and 6,500 lei as of next year.

If turnovers range between 430,001 and 4.3 mln lei (1 mln euros) the tax liabilities will amount to an annual 5,733 lei in 2009 and 8,600 in 2010, while for turnovers between 4,300,001 and 21,500,000 the corresponding tax will be 7,333 lei and 11,000 lei in 2010.

Companies with a turnover in the range of 21,500,001 and 129,000,000 lei (30 mln euro) will be due to pay 14,667 to the state budget and 22,000 lei in 2010, while companies above 129 mln euro will pay a poll tax of 28,667 lei and 43,000 as of next year.