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Deloitte: amendment of government order 114, a reference moment in re-establishing investors' confidence in Romanian business
The amendment of government order 114, in the sense of eliminating negative consequences, could represent a reference moment in re-establishing investors' confidence in Romanian business, but the process should return to predictability in order to be a lasting one, says Dan Badin, Fiscal and Juridical Service coordinating partner, Deloitte Romania.
“Which are the real chances for that to happen in 2020, an election year with two election rounds – locals in summer and parliamentary in fall/winter? Hard to anticipate. Therefore, uncertainty and the lack of confidence still persist, while 2021 budget, devoid of election promises, will need resources it will look for....when? In December 2020?” says Deloitte representative in a press release.
Although, according to the fiscal consultant, 2019 was less “rich”in fiscal amendments than previous years, the impact generated by decision 114/2018 was more powerful because of the span of the document and the way in which it was adopted- on a short notice, without consulting entities affected and without impact studies.
“The effect on economy was a complex one, because it consisted not only of new taxes and expenses for the players involved, but also of budget imbalances in 2019 and investment decisions. All these generated chain negative reactions to the final consumer. On the other hand, impact on the state budget, although positive, was below expectations and did not compensate damages already created or the future ones, considering that investors' confidence will be harder to restore even than budgets of companies affected,” Badin points out.
On the other hand, important measures maintained are those in constructions (higher salaries and fiscal facilities granted to companies in the field), which were considered beneficial to the sector.
In context, Dan Badin considers the impact of amending the order on the business environment will be a positive one, but effects generated by the order cannot be wiped out: taxes paid by companies, discomfort and expenses generated by conformation and the uncertainty that led to blocking investment plans represent costs already paid.
On the other hand he points out that the state should give up certain incomes. This year it received over 600 million lei in 11 months from companies in the energy sector and about 380 million lei from banks in semester 1, 2019, while the tax due for semester 2 will be paid by mid 2020.