AmCham Romania expresses its concern regarding the impact the recently announced fiscal policy measures, both in terms of the increasing costs these are generating for taxpayers and in terms of the budgetary sustainability of such measures. Moreover, this package of measures is proposed shortly after many fiscal changes were introduced, also adopted hastily, thus creating instability and confusion in the business environment with regard to the impact of such measures as well as with regard to their implementation procedure.
In AmCham’s vision, both the frequency of the fiscal changes adopted through emergency ordinances, and their financial and administrative impact takes its toll on doing business in Romania, lowers confidence in the economic governance and in the overall Romanian economy, consequently affecting the country’s competitiveness and capacity to attract resources needed for the economy’s sustainable growth.
It is worrisome that the estimated budgetary deficit to be generated by the announced fiscal change will reach 5 billion RON in 2018 alone, and between 3 and 4 billion in 2019 – 2021, which will hinder the economic growth and puts additional pressure on the observance of the 3% budgetary deficit target. It is highly important to avoid any measures that could lead to additional tax increases and cuts of investments for infrastructure, health, education, research, etc, that are needed for Romania’s further economic growth.
Among the measures with the widest impact is the transfer of the social contributions from the employer to the employee. Whilst the motivation and the benefits of such change continue to be unclear, the negative impact on the labor market is obvious, both by generating increases in salary expenses and by reintroducing discriminatory fiscal treatments between different types of taxpayers. This encourages migration towards other types of labor taxation, thus deepening the negative budgetary impact and creating additional pressure on the labor market. The IT industry, one of the best performing sectors with a significant contribution to Romania’s GDP will be among the most affected sectors by such approach.
With regard to the tax on profit, we consider the implementation time too close compared to the status of the preparation needed prior to the ATAD implementation. The impact of this change on the level of investment financing calls for an amendment, in order to increase the deductibility limit. The complexity of mechanisms such as the rules regarding companies controlled by foreign entities requires an extended preparation period, relative to the degree of fiscal education in Romania, in order to avoid further difficulties for taxpayers during the implementation stage.
A real, constructive dialogue is needed with regard to all the proposed measures, in order to thoroughly analyze the arguments and implications of all provisions, by observing the legislation regarding public transparency which provides a minimum of 6 month before new legislation comes into force.
Although presented as measures to stimulate economic growth, some of the measures, such as tax on turnover for small businesses could have an opposite effect. Considering the structure of companies in Romania, with 80% of the companies with a turnover below Eur 1 billion, their activity could be negatively impacted, therefore, we believe that such measure can only be optional. A comprehensive analysis is needed in order to evaluate the risk of having new insolvencies within this category of companies and the impact on the collection of state budget revenues.
AmCham Romania reiterates the need for the fiscal policy to be integrated in a medium and long term vision for Romania and to be part of a strategic approach that will fully observe the fundamental principles of stability and predictability, provided in the Fiscal Code legislation. AmCham Romania members welcome the intention to modernize the Romania fiscal legislation, and are hereby expressing their availability to be active partners in the consultations to be carried on in this context.
With regard to the all the above however, we consider all measures to be too complex for being adopted through Emergency Ordinances, therefore we recommend that the regular legislative process is followed in order to include a proper consultation framework with all stakeholders and impacted parties.