New Fiscal Code to turn gray economy into black

Businesspeople are asking the Finance Ministry to lower the fiscal burden on the private sector, following in the footsteps of the U.S. administration. Authorities are currently working on changes to the Fiscal Code, which are to be announced shortly and publicly debated. Representatives of employer unions and businesspeople associations say they have not been consulted on the new code so far.

"We are waiting for the Ministry of Finance draft, and only then will we establish applied working groups on each of the proposed modifications. We hope that the new Fiscal Code will not only meet the urgent needs of the Ministry of Finance to collect higher revenues, but to long-terms, for times of war and times of peace," said Foreign Investors Council's Chief Executive Officer, Doina Ciomag.

According to consultants, there are currently two divergent philosophies regarding the Fiscal Code. One is the vision of the Ministry of Finance, directed towards attracting as much money as possible for the budget, while tax specialists want to contribute to a modern, clear, and flexible fiscal system. "Some of the changes announced by the Ministry of Finance, such as the lump-sum tax, will lead to a deviation away from the flat tax," said Ionut Simion, Tax Partner of the PricewaterhouseCoopers advisory company. According to Simion, there are derogations from the flat tax in the current Code as well - for instance, the tax on casinos and gambling, but the phenomenon tends to spread, and we can no longer talk about a unitary fiscal system.

Gabriel Sincu, Senior Manager of the Mazars Romania consultancy company, also said that we are witnessing "the death" of the flat tax, considering taxes on revenues registered on the Real estate market. "I do not believe that the lump-sum tax will succeed in attracting more revenues for the budget, but will transform part of the grey economy into black economy. Tax evasion will increase, as companies which do not report a profit now will not declare their future revenues," Sincu said. "We are doing the exact opposite of the rest of the world in our battle against the crisis - everybody else, including the USA, are lowering taxes, while we are raising these," he added.

Business Standard