Top 6 solutions to upgrade tax collection system

Tax on luxury items

The introduction of a tax on luxury goods would bring a substantial contribution to increasing state revenues that Romania pines for in these recessionary times.

“In Romania, luxury items are not subject to withholding tax. First, there must be identified all goods described as high-grade or non-essential, to make that correlation between personal income, and the possession of luxury goods. The latter is not subject to any tax, which causes frustration to any normal citizen. We are familiar with similar cases”, said Luminita Ristea, managing partner at Nexia International.
It is the state’s responsibility to secure an equitable fiscal treatment to its citizens, whom it failed to accomplish so far, Ristea said.

Luxury tax should be applied with reference to income tax or wealth tax, she continued.

“It would be normal to see higher taxes on cars whose price exceed 30,000 euros and luxury properties, such as 16-room houses. The state should make a difference between a tax on a Tico and one on a Maserati or Lamborghini”, said Ristea.

Punitive taxes on unfarmed land

By taxing unfarmed arable land, the state would stimulate revenues to state budget, representatives of Nexia say.

Thus, the owners of arable lands who refuse to harness their full potential should rent the land or pay the tax bills to the state.

“No land-use strategy has been put in place, and these unfarmed lands owned by various companies, investors or natural persons must be cultivated and developed, or it would incur a tax burden, unless the owner doesn’t put it up for rent. Something must be done to harness the full potential of the agricultural sector as it would stimulate economy and thereof tax collection system”, Ristea explains.

Advance corporation tax

Luminita Ristea says the payment of corporate income tax in advance have the potential of securing important revenues to state budget.

“For the time being, this tax is paid in advance by only a few banks. If it was applied to companies, it would be a method of securing a constant revenue stream to state budget.

However, raising the value added tax (VAT) under current shaky economic conditions would only pave the way to lower revenues to state budget, due to sharp fall in consumption.

Abolishment of poll tax

The revenues to state budget subsequent to the introduction of poll tax would most likely meet Minister of Finance’s expectations, even though almost 100,000 companies were sent out of business as a consequence.

Nevertheless, the consultancy company requests the abolishment of the poll tax that caused a major increase in the number of bankruptcies. “The impact won’t be visible in first half but at the end of the year, when we expect a new wave of failures or requests for tax relief”, said Dinu Petre, partner at Cunescu, Balciu si Asociatii.

A more efficient collection process

In addition, the activity of the revenues service (Fisc) now under the National Agency for Fiscal Administration (ANAF) must be improved.

The efficiency of the tax collection system would be improved if the revenue service used all the legal instruments available and if all effective laws were applied to surface the grey economy, Ristea explained.

The possibility of companies to designate different time periods as their fiscal years

The state must enable companies to determine their fiscal years depending on the regulations adopted by the country of origin of its parent company, in case of multinational companies.

“If this was explained and regulated by law, the state would experience a broader cyclicity in tax collection. The state must show more flexibility in terms of tax collections”, Ristea concluded.