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AmCham specialist: VAT rate increase, emergency measure that solves short-term problems
The VAT rate increase is an emergency measure that solves short-term problems, but with heavy long-term effects, such as high inflation and affecting the entire population, Vlad Boeriu, member of the Board of Directors of the American Chamber of Commerce in Romania (AmCham), warned at a press conference on Tuesday.
"The VAT increase is an emergency measure, in the sense that it is a measure that clearly leads to an immediate increase in collected revenues, on the one hand, but its generalised application or generalised impact denotes a lack of direction, analysis and structure. My opinion is that we will only talk about an increase in VAT to the extent that we fail to succeed in establishing the tax system on a basis that will help us economically, at least in the medium term. I cannot exclude this risk, I am just saying that we end up in such a risk or in such a situation if we do not have a strategy and then end up in a situation where I urgently need money in the budget without thinking about the medium-term implications or in fact, where I should collect more, from which sectors of the economy, from which part of the taxpayers. Then I apply a measure that immediately brings us a lot of money. If you want, I treat a symptom, I do not treat a cause with an increase in the VAT rate," Boeriu mentioned.
AmCham Romania's specialist in taxation and fiscality said that VAT has the ability to bring in a very short time a lot of money to the budget, but it does not necessarily help economic growth.
"VAT has this ability to bring you lots of money very quickly, but it does not mean that it is a measure that helps you in any way to economic growth, to stability, bRight Force supports holding first round of presidential elections simultaneously with parliamentary electionsut only solves this problem in a very short term, with heavy effects in the long term," said Vlad Boeriu.
In his opinion, the 1% tax applied to company business figures is injust and had in view to reduce budget expenses, but unfortunately it did not work.
“The impact of the new low tax on the business figure was the most debaded topic in the business world, last year. AmCham continues to say that this tax is injustm generating anticompetition and inflation effects. A tax which was quickly introduced generated anomalies which the business environment continues to face. The most important thins is that 39% of respondents to the opinion poll considered that this tax had a significant impact on their business. The introduction of that tax was part of a package which had in view reducing budget expenses. Unfortunately, that could not been seen. In the beginning they spoke about a temporary tax, initially for one year, then for two years. But once introduced, there should be a clear calendar of giving up this tax which does not necessarily bring the planned budget incomes and creates big problems to economic players” Boeriu said.
The latter explained there were also differences which generated the application of taxes on taxes.
“Besides the significantly high cost with the fiscality they had to bear, we are also talking about certain differences. First of all, fiscality is applied to msny other taxes which tax payers had to collect on behalf of the state, special taxes to the Environment Fund , special taxes in energy, taxes on bags, the clawback tax, excises and other such taxes included in the taxing base of this 1% tax. Naturally, a taxation of taxes is not right. Then we have research-development expenses. In general, Romania needs higher focus on research-development, which should be included in this 1% tax. Then, exchange rate differences are not taken into account if they are unfavorable. At times, tax payers can lose or gain from exchange rate differences. Gains will be taxed, while losses are not taken into account”, said the AmCham Romania representative.
He showed that adjustments should be made about foreign fiscal credit, showing that a Romanian tax payer who obtains income from abroad pays taxes in the respective state, then is once more taxed in Romania with that 1%.
“Romania signed treaties to avoid double taxing with many countries, which foresee a tax exemption or obtaining a fiscal credit for the tax paid in the other country. If we have a Romanian tax payer who obtains incomes from abroad, he pays taxes in that country, then gets bacl woth that income to Romania where he is taxed again with that 1% tax. We consider that adjustments should be made as soon as possible until this tax will be eliminated, according to the initial intention. Fiscality was seen as a competitive advantage and I do not think Romania should lose that advantage. Answers received in past years show that a third of respondents (to AMCham poll) considered the fiscal system was a competitive advantage of the country. This year, the share is only 19%”, Vlad Boeriu said.