New tax legislation
The government in Bucharest is determined to implement this year a new Fiscal and Fiscal Procedure Code.
Roxana Vasile, 12.03.2015, 14:47
The government in Bucharest plans to start the implementation this year of the new Fiscal Code and Fiscal Procedure Code resulting in lower taxes and duties. Prime minister Victor Ponta promised to submit the bill to Parliament by the end of the month to be passed before the next parliamentary recess.
Victor Ponta: “It is a radical reform for Romania. We can do it now because the economic results allow us to and we should not miss the opportunity. I would very much like for the two new codes to be debated by Parliament. I am only considering the possibility of the government’s calling for a vote of confidence on the bill in the event of a political deadlock. I hope this will not be the case. I have noticed that the opposition has changed its initial position, which was only motivated by political reasons, and will support the Fiscal Code, which is a good thing, because this is not my party’s Code, but Romania’s, and will help create jobs and stimulate economic growth.”
According to Prime Minister Ponta, the business community is looking forward to the implementation of the new fiscal legislation, which may create over 300,000 jobs. The Fiscal Code bill provides, among others, for a VAT reduction from 24 to 20% next year and by another 2% in 2018. The VAT on basic foodstuffs such as meat, fish, fruit and vegetables would also be reduced from 24 to 9% as of next year.
Starting in 2017, the amount of social security contributions will decrease from 10.5 to 7.5% for employees and by 15.8 to 13.5% for employers. The government also proposes a cut in the flat tax from 16% to 14% starting in 2019. Other measures proposed include a reduction in the excise duty on fuel and an increase in the house and land tax.
Supporters of fiscal relaxation, the Liberals in opposition said they would never vote in favour of the Code. They say the possibility for the government to call for a vote of confidence to force the bill through would be a mistake. The Liberals argue that a bill like the Fiscal Code should stay in public debate long enough for the population to understand its advantages. They also accuse the Social Democrats of populism, saying cutting taxes is unrealistic.
The NGOs, on the other hand, say the amendments to the Fiscal Code would affect the incomes of thousands of such organisations, as well as hospitals, universities, schools and museums and would “penalise” the large companies that make a profit and are involved in sponsorship activities. Economists are divided over the new fiscal legislation, with the most cautious of them doubting that a relaxation of monetary and fiscal policies could lead to economic growth.
