Romania will have a new Fiscal Code

Two new fiscal bills, the Fiscal Code and the Fiscal Procedure Code, were approved by the government on Wednesday and will now be debated by Parliament.

Valentin Țigău, 26.03.2015, 13:43

One measure of great impact introduced by the new fiscal legislation is the cut in the VAT to 20% for general goods and services and to 9% for meat, fish, milk and diary products, eggs, vegetables and fruit. Although the new fiscal law is only meant to come into force on January 1st 2016, the Social Democrat prime minister Victor Ponta says one of its provisions may be applied before this date:

“We may apply one of the provisions of the law, namely the VAT cut, even earlier, because the budget allows it. However, it will not be possible for both types of VAT cuts to come into effect sooner, namely both the VAT for general goods and services from 24 to 20% and that for basic foodstuffs.”

The prime ministers says the new Fiscal Code will not affect the level of pensions and salaries, but will create a flexible and modern framework for local duties and taxes. The new fiscal legislation approved by the government also provides for a cut in excise duties on basic energy products, with excise duties dropping by 20% for Diesel fuel, by 18.6% for leaded petrol and by 16.6% for lead-free petrol. The level of social security contribution will also be reduced as of 2018, by 3% in the case of employees and 2% for employers. The flat tax rate is expected to decrease starting in 2019 from 16% to 14%. Other measures to be implemented by 2020 include the elimination of dividend tax and the tax on specific built structures and a cut in excise duties. Prime minister Victor Ponta explains:

“We will finally have the two Codes and starting January 1st 2016, we plan to enter a very clear path that will allow us in 2016, 2017 and 2018, to at least maintain the current economic growth rate of 3% and even improve the job creation rate.”

The opposition, however, has already made public its intention to amend the two fiscal laws. The Liberals, for example, argue that businesses will be affected by the increase in local duties and taxes resulting from the application of the new tax measures. They say they will look very closely at the sustainability of some of these measures to prevent a depletion of the funds earmarked for pensions, public sector salaries, healthcare and education