about us | newsletter | contact | archive | members area

»
  Features:      COUNTRY FOCUS   |   SECTOR ANALYSIS   |

Tackling a taxing problem

Doubling the penalties for tax evasion – this was a measure suggested in an amendment to a law put forward by Senate vice-president, Dan Voiculescu. The amendment was not supported by his colleagues, prompting Voiculescu to resign. So where does Romania stand on tax evasion?

July 2012 - From the Print Edition

In previous years, local tax evasion reached more than 10 percent of the Gross Domestic Product (GDP), meaning EUR 10 billion in absolute value.
Much tax evasion comes from the black labor market. Employers fail to report approximately 35 percent of the employees registered in the national accounts to the state’s registries. This means that over two million jobs are unofficial, almost half the total number of pensioners. Other major sources are unpaid VAT and income tax.
A report by the Fiscal Council for last year claimed that if Romania fully collected all the taxes and charges that were payable, it could have record budgetary revenues – as a percentage of GDP – close to the EU average. This suggests a complete rethinking of how to collect taxes in Romania is called for. The state should pursue tax dodgers, not try to get even more out of those who currently pay, as our politicians seem to favor. In other words, it’s not increase existing revenue streams that should be the target, but getting the evaders to start paying up.
A few years ago there was a buzz about the idea of a wealth tax. Many of us have encountered enterprising individuals whose official income seems unable to support their lavish lifestyle, and yet there is no obvious source for their additional earnings. Such a tax ought not to be punitive, but should encourage all categories of citizens to participate in achieving the GDP.
Unfortunately, the idea did not get beyond the discussion stage in Romania, though it has been successfully applied in Europe. For example in Germany, a solidarity tax of 5.5 percent is levied on income tax for higher earners. Very large estates are taxed in other countries, such as France, Switzerland and Norway. It is clear that such a law must be very well designed, as it must not simply hammer the wealthy. The law should be crafted so it catches almost all taxpayers who own property and who can really afford to pay tax but avoid doing it.
Recently, a ranking of the prices in Romania compared to EU prices was released. In some categories Romania has the lowest prices in the EU, and these include alcohol and tobacco. The thought occurred to me: why don’t we apply – even if just temporarily – an additional tax (let’s name it for solidarity) on these types of products?
But the issue would still probably be the state’s capacity to collect. The government must therefore find a way to persuade tax evaders to go legit. Everyone knows that some of the more persistent offenders will need a hard line to be taken. Specifically, in Romania’s case, strong sanctions for tax evasion – doubling the current punishments should work.
Which brings us back to the recent goings-on in Parliament. I won’t get bogged down in the detail of who came up with the amendment and the reason for the resignation. But I wonder why MPs rejected it. Do they have a vested interest in continuing to protect those who cause the biggest holes in the budget through tax evasion? Whether or not we get an answer to this question, unfortunately the problem remains, and given the parlous state of Romania’s finances a solution is becoming increasingly necessary.



COMMENTS
There are 2 comments:

VICHI: on 2012-07-17 09:52:20
Voiculescu also advanced in several times the ideea of dropping VAT for basic food, but the Governement, leaded until spring, by Boc and Basescu, disagreed.

Limon: on 2012-07-17 11:27:01
@Vichi, this is a very good idea, and a ''must'' for Victor Ponta.

 
ADD A COMMENT
 
Name
Email
Comment
Validation Code
   
 
 

2 Comments  |  6059 Views
Daily Info
European Investment Bank celebrates 25 years in Romania with 13 billion Euro for economic and financial support

The European Investment Bank (EIB) has approved more than 13 billion Euro worth of financing and advisory services for Romania since it started its operations in the country 2...

E-Distributie Dobrogea invests 12 million RON for the modernization of the Abator primary station in Constanta

E-Distributie Dobrogea has begun an investment project worth around 12 million RON (2.6 million Euro) to modernize the primary station (high/medium voltage) Abator in the city...

Telekom Romania and Alior Bank launch Telekom Banking

Telekom Banking, a digital financial project in Romania, developed within the partnership between Telekom Romania and Alior Bank, one of the largest banks in Poland, aims to m...

ADM Capital sells Brikston Construction Solutions to Wienerberger AG

ADM Capital, an international private equity fund, acquired a 98 per cent stake in Brikston Construction Solutions (Brikston) in July 2014 and has agreed to sell its full shar...

PM Tudose: We will shortly come up with new form of split VAT collection

A new form of split VAT collection, which will respond to the requests made in this period by business representatives, will be presented shortly, Prime Minister Mihai Tudose ...

 
 
   
advertising

advertising

advertising

advertising

advertising

advertising

More on Features
German investments in Romania: Companies are worried about fiscal measures and infrastructure

Romania still offers good business opportunities, but in order to continue foreign investments and job creation, companies need a stable economic environment, legal stabili...

Chinese investments in Romania: Aiming potential

For many years, China has had only several large companies present and active in Romania, mainly in technology, energy, trade, farming and several newly announced ones in a...

Austrian investments in Romania: Companies are generally happy with market development

Austrian investors see Romania as an excellent investment destination and the largest market in South-Eastern Europe. Romania represents a resourceful country, dominated by...

Operational leasing on the road to growth

The Romanian operational leasing market went up by 7.5 per cent in the first semester of the year compared with the end of 2016, exceeding 64,350 units. During this period,...

US investments in Romania: Tremendous potential

One of the fastest growing economies in Europe, Romania is an attractive market for foreign investors in several industries, with potential yet to be developed. The Diploma...

French investments in Romania: Building on solid foundation

France and Romania became business partners in the early '90s and since then the bonds have been built on trust and mutual commitment. Currently, French investors have gain...

Transport and Logistics: Plenty more to come

The vacancy rate for logistics and industrial spaces in Bucharest is close to zero, with low deliveries of new projects and high demand in the first quarter. According to d...