New Fiscal Code to turn gray economy into black

„We are waiting for the Ministry of Finance draft, and only then will we establish applied working groups on each of the proposed modifications. We hope that the new Fiscal Code will not only meet the urgent needs of the Ministry of Finance to collect higher revenues, but to long-terms, for times of war and times of peace,“ said Foreign Investors Council’s Chief Executive Officer, Doina Ciomag.

According to consultants, there are currently two divergent philosophies regarding the Fiscal Code. One is the vision of the Ministry of Finance, directed towards attracting as much money as possible for the budget, while tax specialists want to contribute to a modern, clear, and flexible fiscal system. „Some of the changes announced by the Ministry of Finance, such as the lump-sum tax, will lead to a deviation away from the flat tax,“ said Ionut Simion, Tax Partner of the PricewaterhouseCoopers advisory company. According to Simion, there are derogations from the flat tax in the current Code as well – for instance, the tax on casinos and gambling, but the phenomenon tends to spread, and we can no longer talk about a unitary fiscal system.

Gabriel Sincu, Senior Manager of the Mazars Romania consultancy company, also said that we are witnessing „the death“ of the flat tax, considering taxes on revenues registered on the real estate market. „I do not believe that the lump-sum tax will succeed in attracting more revenues for the budget, but will transform part of the grey economy into black economy. Tax evasion will increase, as companies which do not report a profit now will not declare their future revenues,“ Sincu said. „We are doing the exact opposite of the rest of the world in our battle against the crisis – everybody else, including the USA, are lowering taxes, while we are raising these,“ he added.

Maria Grapini, President of the Federation of Employers in the Light Industry (FEPAIUS) said that now, in the time of crisis, the government should come up with ways of supporting companies and encouraging entrepreneurs to develop. „I see nothing in terms of our demands on eliminating taxes for reinvested profit. [...] If the tax system does not change to our benefit, many SMEs [small and medium-sized enterprises] will not survive,“ Grapini said. The Chairman of the Budget-Finance Commission of the Chamber of Deputies, Viorel Stefan, told Business Standard that the Social-Democratic Party (PSD) will support the progressive taxation of income. „Today we have Romanians who are very wealthy and others who are poor. It is not fair to have the same taxation model when talking about the property of the poor Romanians and that of a very rich one,“ Stefan said.