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Communication AmCham Press Releases February 12, 2007 : The American Chamber of Commerce in Romania (AmCham Romania) stands against the proposed 1% solidarity tax

February 12, 2007 : The American Chamber of Commerce in Romania (AmCham Romania) stands against the proposed 1% solidarity tax

by AmCham Romania February 12, 2007

Bucharest, February 12, 2007 – The American Chamber of Commerce in Romania (AmCham Romania) expresses its strong concern with regard to the proposed fiscal initiative concerning an additional 1% tax on the profit for companies with a turnover exceeding EUR 100,000. This regulation contradicts the main principles of the Fiscal Code, and has a negative effect on the stability and predictability of the fiscal policies in Romania. AmCham expresses its worries for the future implication of such a decision and draws the attention on the side effects the creation of a Solidarity Fund may generate:

1. Noncompliance with the rules for amending the Fiscal Code
The Fiscal Code provides that amendments to its provisions may be enacted only through a law, which should be promoted 6 months prior to its enforcement. Moreover, any change or amendment is to be enforced beginning with the first day of the year following the year during which the law was adopted.

2. Increasing the taxation level from 16 la 17%
AmCham Romania has actively promoted the adoption of the flat income tax, due to its positive impact on foreign direct investments, placing Romania in a competitive position compared to fiscal policies adopted by other countries in Central and Eastern Europe. Introducing a new tax as of February, which impacts on a tax provided by the Fiscal Code (profit taxation), means subtly increasing the profit taxation level of tax-paying legal entities from 16 to 17% through this proposed increase of the social solidarity tax.

3. Imposing discriminatory measures and potential unintended effects
The measures imposed through this law have a discriminatory nature, as the social solidarity tax is to be applied only to profit taxpayers with an annual turnover exceeding EUR 100,000. Also, this provision could encourage a proliferation of legal entities controlled ultimately by the same or similar owners in order to avoid any one entity exceeding the EUR 100,000 turnover amount.

4. Noncompliance with the certainty of constraint principle
The law text does not contain clear provisions with regard to determining, reporting and payment of the social solidarity tax. It mentions that the tax will be applied to the yearly profit, without mentioning if it refers to the fiscal profit, as it is the case with the tax on profit, or to the accounting profit. Moreover, the methodological norms for the application of this law, which might clarify such aspects, will be established within 3 months from the law enforcement, a fact that will create confusion among the taxpayers.

AmCham Romania expresses its confidence that maintaining the taxation level set by the existing fiscal legislation will contribute to developing a stable economic environment in Romania and to increasing the level of foreign direct investments in our country, especially as the current taxation level represents a strong competitive advantage for Romania.

About AmCham Romania

The American Chamber of Commerce in Romania is a non-profit and non-political organization founded in 1993 by American investors in Romania. It is one of 98 international AmChams in 86 countries affiliated with the U.S. Chamber of Commerce based in Washington, D.C. and a member of the European Council of the American Chambers of Commerce. Currently, AmCham Romania has about 260 members, including multinational and local companies, as well as non-governmental organizations, with strong business ties to the United States,

For further information please contact:

Anca Harasim, AmCham Executive Director
Phone: + 021 312.48.34
Fax:       + 021 312.48.51

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