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PwC: Fiscal amendments proposed by authorities are unclear, generate uncertainties and on the brink of infringement

Ionut Simion, Country Managing Partner PwC Romania pointed to the fact that in a rather unfavourable global context, where investors are very cautious and hostile to any kinds of risks, the recent measures announced by the authorities risk to affect Romania’s competitiveness.

“Under these circumstances, legislative stability and predictability are basic rules. That is why the adoption of fiscal measures of such importance should have been discussed with businessmen and the rest of social partners and preceded by a thorough impact study, so as to have a clear image on medium and long term effects at economic and social levels. But it is not too late for such an analysis and for consulting the business environment,” Simion said.

However, the authorities’ estimates in the substantiation note of the draft Emergency Order speak about annual incomes of 3.6 billion lei from the application of this tax in the banking sector, which indicates the fact that authorities are counting on applying the tax once a year or at a significant ROBOR interest rate level below the one registered at present in the banking market, according to PwC.

“Besides the way of applying the tax, which should be settled, the mechanism by which the authorities established 1.5% of ROBOR interest rates as reasonable, while quotations over that level are considered excessive and taxed progressively. Establishing such a level can affect free competition in the inter-banking market,” said Daniel Anghel, the leader of Fiscal and Juridical Consulting Department, PwC Romania.

The level established for this tax is the highest in EU. In the other member states where such a tax is applied (Hungary, Poland, Austria, Great Britain) the level is significantly lower and the tax is not progressive, according to PwC.

“Another element of uncertainty is the impact of applying such a tax on crediting, financing costs, both for companies and for citizens and in fact for the state. It is not clear to what extent such a high level of the tax on financial shares can be supported by smaller banks or IFNs. Applying the tax could have a negative impact on prospects of the country’s economic growth and can lead to lower financial intermediation, when Romania has one of the lowest financial intermediation levels in EU,”according to Diana Coroaba, leader of the Fiscal Consulting Team for Financial Services, PwC Romania.