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ANALYST: 90% of the active companies of Romania will be affected by the 1% tax and 112,000 workplaces will be lost
90% of the active companies of Romania will be affected by the 1% tax of the turnover, measure bringing a reduction of the taxes paid of 631 million lei and the loss of 112,153 work places, says Iancu Guda, the chairman of the Association of the Financial-Banking Analysts of Romania.
‘The single quota of 1% applied to the turnover for companies with income under 1 million euro can lead to a reduction of the taxes paid by these companies of approximately 631 million lei. 27% of these companies win, those companies with income under 0.5 thousands euro and zero employees, as well as the companies with income between 0.5-1 million euro and gross profit over 6.25%. Only 3% of the companies lose, the rest 70% paying a similar tax. However, the final effect is lower, as almost 112.153 work places are lost, approximately 2% of the hired workforce (due to the disappearance of the fiscal interest) and the majority of the minimum salary per economy may annul up to half of the fiscal optimisation’ Iancu Guda said.
Starting with 1 January 2018,all companies with the turnover under one million euro will pay a tax of 1% of the turnover. At the same time, the minimum gross salary per economy increases starting with next year at 1,900 lei, as compared to the present level of 1,450 lei.
The impact of the new fiscal regulations, by comparison to the present fiscal burden, is different depending on the registered income, number of employees and the gross profitability margin as follows:
The companies with income between 0 – 500,000 lei which register zero employees will be influenced positively, as they pay now a tax of 3% of the turnover, which will be reduced to 1% through the new regulations, as there are 104,097 companies. These companies will pay a tax on the turnover three times lower, the estimated drop (based on income registered in 2016) being from 343 thousand lei ( for the present tax) to 113 thousand lei ( the estimate regarding the new tax).
The companies with income between 0-500,000 which have at least one employee will not be affected by the new measure, as they pay at present a tax of 1% for the turnover. In this situation there are 291,937 companies, which will have a similar fiscal burden to that of 2016 ( the only difference being that of the level of income registered in the future).
The companies with income between 500,000 – 1,000.000 pay now a tax of 16% applied to the gross profit. Thus, the passing to tax of 1% on turnover will have a different impact depending on profitability, as follows:
The companies with losses with register higher fiscal costs, as at present they do not pay any tax on profit. It is about 2,177 companies in this situation which pay a supplementary tax of 68 thousand lei starting with 2018.
The companies which register a margin of the gross profit between 0% - 6.25% will register higher fiscal costs, as the tax of 16% applied to gross profit is inferior to the tax of 1% applied to turnover. A number of 8,239 companies are in this situation, they register fiscal costs growing from 110 thousand lei ( for activities developed in 2016) to 260 thousand lei ( for estimates for the same income and gross profit, but considering the new level of taxation).
The companies which register a margin of the gross profit over 6.25% will registere lower fiscal costs as the 16% tax applied to the gross profit is superior to the tax of 1% applied to turnover. A total number of 9,247 companies are in this situation (4,853 registering a gross profit between 6,25 % - 15% and 4,394 a gross profit over 15%). These companies will pay an income estimated of 292 thousand lei, as compared to 915 thousand lei at present.
From the total of 415,698 companies with income under 1 million euro, approximately 70% will pay the same tax as at present, 27% will register an inferior tax and only 3% will pay more.
The total tax paid by all companies which register a turnover under 1 million euro will drop from 2,476 billion lei ( for activities developed in 2016) to 1,845 billion lei ( according to the estimate made on the basis of the new tax) the negative budgetary impact on the collection of tax on those companies being 631 million lei.
In exchange, the single quota of taxation of turnover with 1% for all companies which register income under the threshold of 1 million euro may represent a loss of the fiscal motivation regarding the policy for recruitment for the companies with one employee. Thus, on the basis of the fiscal code valid at present, the companies with income under 500,000 euro pay tax for turnover of 1% if they have one employee. There are 112,153 companies in this situation, which prefer to register one employee (probably, in most cases, this being the shareholder of the company paid at the level of the minimum salary per economy) as the supplementary costs with the 112,153 employees (211 thousand lei estimated at the level of the minimum salary per economy) are covered by the inferior tax of 1% as compared to 3% if they had no employee (the fiscal optimisation being from 481 thousand lei to 160 thousand lei, thus 321 thousand lei lower taxes). In the new context, the tax on turnover is 1% for all companies with income under 1 million euro (irrespective of the number of employees) and the gross minimum salary per economy grows to 1,900 lei,probably these companies will annul the majority of the work contracts with the respective personnel.
The reduction of the total tax paid by the companies which register income under 1 million euro must be analysed in the context of the increase of the gross minimum salary to 1,900 lei starting with 2018. Thus, according to the figures published by INSSE, approximately a third of the workforce hired is paid at the level of the minimum salary per economy, but the exact number depending on the sector of activity is not known.
Between 34% - 47% of the fiscal optimisation is annulled by the increase of the expenses regarding the workforce. A special situation is that of the sectors of activity where the increase of the minimum salary per economy will generate superior costs to the fiscal optimisation, namely the fabrication of the textile products, clothing and footwear ( where the costs with salaries grow twice over the level of the fiscal optimisation), the food industry and drinks and transport. Similarly, in case of the companies which activate in the sector of other activities, of personal services, as well as retail, the increase of the salary expenses annusl almost entirely the fiscal optimisation.