23 Octombrie 2009

After 20 years, fiscal reform is far from being complete

The single tax (16%) and standard value added tax (19%) are two of Romanian fiscal system’s main advantages in the region, according to Deloitte. However, the frequency at which the Government operates legislative changes, the deficiency of the regulatory framework and inefficiency of the administrative apparatus act as instability drivers in the robust development of the Romanian business environment.

Raising the VAT - a solution on a short-run

After 20 years of reforms, Romania has not yet joined the Western elite in terms of tax collection and tax law enforcement.

“From certain perspectives, the fiscal development level in a country is directly proportional to the maturity level of the economy. In Romania, the tax system has undergone numerous development stages, in an effort to meet the demands of the business environment. Companies we have talked to, have acknowledged the progress of the system and ticked off a series of fiscal advantages. However, concerns have been expressed regarding the interpretation of tax procedures and the poor fiscal stability, enforcement and transparency”, said Rodica Segarceanu (photo), Partner Deloitte Tax and head of International & Corporate Tax.

“I can say that the legislative process in Romania is in line with the standards of the European Union. But the enforcement of these standards is what fails to be within the EU spirit. According to World Bank, taxation rates, regulation and fiscal administration are the key elements for the business environment during investment decision-making process. Romania has managed to develop its fiscal system over the past 20 years, but the reform is far from being complete, and this pitfall reflects in the country’s capacity to attract foreign investors and in the performance of the local business sector”, said Pieter Wessel, Partner Deloitte Tax and head of VAT team.

VAT - companies' biggest challenge in their relation with the tax authorities

The “Romanian Taxation – X-Ray of an Incomplete Reform” survey conducted by Deloitte Romania – a CFO survey on Romanian taxation stressed the need for authorities to develop a medium and long-term fiscal strategy and focus on reducing the frequency of legislative changes (34%).

Considering the current budgetary constraints, the companies that participated in the survey have expressed their concern towards a possible increase in social insurance costs (36%), in the value added tax (25%) and increase in the profit tax (22%).

On the other hand, only 17% of the surveyed said the elimination of single tax for income tax and the reintroduction of the progressive tax would have the worst impact on their business.




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