- News and Current Affairs
- Features and Reports
- Useful information
- Our Shows
- ON DEMAND
Romania's new Fiscal Code has been endorsed after lengthy debates.
Romania's new Fiscal Code, endorsed after lengthy debates, primarily stipulates a slash of the VAT from 24% to 20% as of next year, with a further 1% cut as of 2017. The Code also regulates a special 5% VAT rate on books, textbooks, newspapers, magazines, sports competitions and cultural events, alongside a number of tax raises, including on privately-owned real estate used for business purposes. The new legislation also does away with the tax on special constructions and the additional fuel excise, starting 2017 instead of the originally planned 2016. The tax on special constructions in agriculture is an exception, in that it will be scrapped on January 1, 2016. Cutting the tax on dividends from 16% to 5% was also postponed for January 1, 2017, instead of 2016.
For micro-enterprises, the revenue tax will be 3%, while start-ups with at least one employee will pay 1% in revenue tax for the first 24 months of operation, if their shareholders or partners have not held shares in other companies. The profit tax rate stays at 16%, although a cut down to 14% was originally planned for 2019. For companies running night bars, clubs, discos and casinos, the profit tax is 16%, but no less than 5% of the total revenues. As for reinvested profits, they remain tax-free until the end of 2016, as originally stipulated. Social contributions will not be reduced under the new Fiscal Code, although amounts contributed by both employers and employees were originally designed to go down in 2017 and 2018. The tax rate for residential buildings ranges between 0.08% and 0.2%, with the exact amount to be set by the local councils. Moreover, different tax rates will be charged, depending on how the property is used. Buildings used for business purposes will be subject to tax rates between 0.2% and 1.3%.
Economic analyst Adrian Mitroi told Radio Romania more about the new Fiscal Code:
"This Fiscal Code is, finally, a measure that benefits citizens. It is the consequence of economic growth. I don't believe it will necessarily bring about economic growth, but it is finally a step that will benefit us, in the form of economic growth and relative economic stability in an international context, which is not necessarily a simple one. Insofar as it regulates a fiscal relaxation, it will obviously bring forth more money for consumption, but we should not take this for granted. Things are not easy, especially in this international context, and as I was saying this Fiscal Code focuses on consumption rather than investments. But, to look at the bright side, it was endorsed through a notable political consensus. And this is how this kind of measure must be discussed, by the entire Romanian society, because we are talking about legislation that will be applicable for at least an economic cycle, for an entire generation that will benefit from this new fiscal relaxation. And we also have monetary relaxation. This is a good mix, because it provides the necessary support in terms of macroeconomic policies. What we need now is support from local public authorities for investment and other major projects, particularly in infrastructure, which bring about economic growth."
Many have argued that after the implementation of the new Fiscal Code, the budget deficit will exceed substantially the level agreed on by Romania with international financial institutions. Here is what economic analyst Daniel Apostol believes:
"This is where the key disagreement lies. As you have seen, the ministry tells us the budget deficit will get near 2% of GDP. I've read a report by the Fiscal Council, which says that, unfortunately, the cut in taxation, that is, a more substantial reduction in budget revenues, combined with the overheating of the expenditure segment, triggered by the raise in healthcare salaries, might lead to a budget deficit almost double this figure - around 4%. I believe the current provisions of the Fiscal Code cannot ensure a balance of budget revenues and expenditure, and this is the job of governmental policies, not of the Fiscal Code. Budget implementation is in the hands of the government, which must adjust expenses to the resources it has available."
The Finance Minister Eugen Teodorovici argues in his turn:
"This temporary deficit widening is under control. In 2016 we will have a budget deficit of 2.9% at most, with this Fiscal Code implemented, but, when drafting the budget for the following year, we will take steps to cut the useless expenses in the administration, in economy in general, without affecting investments, so as to make sure the budget deficit is narrowed to 2.5%."
Government officials even say that some of the measures postponed for 2017 could be implemented sooner than that, in several stages starting next year.
Copyright © . All rights reserved