“I believe VAT will increase because this is a quick solution and because nobody will touch the flat tax. It is like winning a fort at the political level. We must also consider what is happening around us. Many European countries are opting for this flat tax solution, which we virtually pioneered,” Mucibabici said.
Pieter Wessel, Partner at Deloitte and tax expert, said that he expects VAT to increase to 22 percent. “I was betting a few months ago that the value added tax will increase to 22 percent. Of course, it would be optimal if this did not increase, but in terms of the budget and competitiveness on the international market, raising VAT is the lesser evil, because it does not led to an increase in production costs, in the case of exporters, for instance. However, if other taxes changed and workforce costs increased, this would reflect in the production cost,” Wessel said. According to him, businesspeople are concerned about the evolution of sales if VAT rises, which will directly affect consumption, as prices will soar.
According to a study carried out by Deloitte Tax between 17 August – 20 September 2009, which includes 130 responses from the chief financial officers of the largest companies in Romania, one in four companies said that increasing VAT would have the greatest negative impact on their business. Also, one in three companies indicated that the largest negative impact would be caused by an increase in social security-related costs.
Regarding new amendments to the VAT legislation, which will go into effect as of 1 January 2010, 81 percent of the respondents said that “VAT legislation is complicated or very complicated. This percentage is far above the degree of complexity indicated by companies in the case of other taxes. Moreover, according to 35 percent of the companies, VAT is the biggest problem in their relationship with the authorities,” the Deloitte study indicates.
Deloitte consultants added that the state should find ways to improve tax collection, by looking at the U.S. model, where the fiscal authorities analyze the revenues of taxpayers by comparing these with the goods they own. “You cannot have an income of RON 500 [some €116], and also have a house and a car. I believe that the state should look at these things to improve income tax collection,” Mucibabici said.