SIMILAR ARTICLES

Four impact scenarios of OUG 114, as they were presented by Florin Georgescu to Liviu Dragnea and C.P. Tariceanu

The tax on bank assets, called the “tax on greed” by OUG 114 authors who imposed it, may reduce the economic growth by 0.6-1.1 percentage… Mai mult

Labour cost increase by field of activity. Remarks

Hourly labour costs grew by 13.09% in the fourth quarter of 2018 compared to the same period in 2017, according to data announced by INS.… Mai mult

Bulgaria vs. Romania: Reform and results of tax authority in Sofia and counter-reform and its consequences in Bucharest

Bulgarian tax authorities, which have successfully implemented a modernization program with World Bank’s support, a program that Romania abandoned after six years of delays and… Mai mult

Traditional budget surplus in January – 3 times lower than in 2018 and 5 times lower than in 2017

The general consolidated budget ended the first month of 2019 with a surplus of RON 717 million or 0.07% of the estimated GDP for the… Mai mult

Finance throws away for good contract for ANAF modernization with World Bank: 6 years and EUR 18 million down the drain

Sources close to talks with the World Bank have stated for cursdeguvernare.ro that the Finance Ministry notified the financial institution in November 2018 that it… Mai mult

Cronicile

EU tax harmonization plan may have negative effects on Romania. Bucharest – totally unprepared

de Adrian N Ionescu , 16.4.2018

European authorities are taking increasingly decisive steps towards tax harmonization of the 27 systems remained in the EU, but the new measures may have negative effects on the Romanian economy and society that could be caught unprepared.

Especially the directive proposal on the Common Consolidated Corporate Tax Base (CCCTB – recently approved by the European Parliament) could have a negative impact from the perspective of the calculation algorithm, according to the experts consulted by cursdeguvernare.ro.

Romanian authorities’ problem is even greater as only 50 of the 500 largest exporters from the country are Romanian privately-owned companies. This shows how dependent the Romanian economy is on the foreign-owned companies, according to PIAROM.

Tax base of multinationals

“The adoption of the Common Consolidated Corporate Tax Base (CCCTB) will lead to a fundamental change in corporate tax rules. (…) The discussion reached us, but in a diluted form and, unfortunately, not adapted to Romanian realities“, says Alin Chitu, director of tax services at Deloitte Romania.

Although in theory the CCCTB proposal “is a harmonization of rules, to eliminate gaps and differences in treatment between national laws that allow companies to use them to obtain a lower tax burden, in practice it is quite possible that some states, especially those with smaller economies, to be negatively affected,” the expert quoted added.

Romania might suffer in a way similar to the one revealed in one of the few impact studies made in the EU countries (Slovakia), responds Ramona Jurubita (photo), Deputy Senior Partner and Head of Tax & Legal at KPMG, to questions of cursdeguvernare.ro.

“There is no empirical study made at the academic level aimed at assessing the budgetary impact of this new tax revolution. Researchers in Slovakia, who dared to make such an attempt in 2013, with data of the Slovakian economy valid in 2009 and 2010, had the surprise to note that the fiscal impact would be negative in their country. Significantly negative, with a potential decline of nearly 30% in the corporate income tax,” says the KPMG expert.

The reason? “The formula of proportional allocation of the common tax base also uses the wage amount paid in that country as a factor and wages in Slovakia were significantly lower than in other countries.

Romania is in the same situation, so what can we reasonably expect? A positive impact on Romania could come from an increase in the certainty of taxation, but only because the rules would not change with the same speed and frequency with which they change now, this being the main problem with the taxation in Romania identified by the business community,” explains Ramona Jurubita.

Tax rate set in Bucharest on gross profit rate decided in Brussels

Last week, the European Parliament endorsed the European Commission’s proposal for a directive which defines how the CCCTB tax base is calculated for profits of companies operating in several member states.

The tax base will be consolidated at the level of the group of companies and each tax jurisdiction will apply its own corporate tax rate on a part of the tax base depending on the volume of the group’s activity in that country as measured by the share of sales, assets and labour costs of the entities in that country.

Each country would benefit this way, by taxation, from a part of the consolidated profits of a mutational company, based on a uniform formula applied across the Union.

“What is broken down by the mechanism of the proportional allocation formula is not the tax, but the tax base. The applicable tax rate and the actual allocation remain in the national jurisdiction, as is the case with VAT now,” explains Ramona Jurubita from KPMG.

“The proposal already has a history, as it was initiated in 2011, rejected, went through transformations and came back on the agenda in 2016. We are now seeing an acceleration of the legislative process that comes in a wider context along with the proposals of the European Commission and the OECD to tax the digital economy,” reminds Alin Chitu (photo), from Deloitte Romania.

There is a “clear and growing concern of European authorities, but especially of old member states to find solutions to tax profits based on other rules than the current ones. The explanation is that the taxation framework is decades old, and the economy has changed, new business models have emerged thanks to technology,” says the expert.

Tax incentive leverage weakened

The main cause from which Romania will suffer, like other countries with smaller economies, is precisely that “there will be an allocation based on certain criteria to the national states’ budgets” and “at the same time, the states’ right, limited today, to provide incentives and tax facilities will disappear,” says Alin Chitu.

The corporate tax rate will remain a national prerogative, but the scope of application will be increasingly limited by community constraints.

“It should be borne in mind that, even within a union there is a tax competition to attract investment, so Romania should examine both the benefits and disadvantages of the CCCTB implementation and balance them to make sure that it combines its own interest with the European community’s interest in the positions it expresses,” says the expert.

The problem is that “we have no quantitative answers to the question how will Romania be affected?, but only reasonable assessments”, notes Ramona Jurubita.

Which means that “an analysis made by authorities would be even more necessary because, beyond principles and the association of the new rules with the tax avoidance issue, there is no European impact study showing the effects from country to country,” remarks Alin Chitu.

ANAF stimulated by constraints

In addition, the path to appealing the EU Court (CJEU) will open “to correct potential misinterpretations of the Community legislation on corporate taxation by Romanian tax authorities” – which would be the good part of the constraints, according to Ramona Jurubita.

“Currently, the VAT legislation framework is functioning this way. The extension of the framework to the corporate income tax promises to ensure more rigour, clarity and stability from the Romanian tax authorities in relation to the taxpayer,” says Ramona Jurubita.

And the European Commission (EC) is in a hurry and wants the new system to take effect in two years, in 2020.

While in a previous strategy “the EC proposed a two-step approach (first to harmonize the calculation of the tax base, and in a second phase, to impose the consolidation at the European level, the European Parliament decided to revolutionize the way of taxing the profits of all multinational companies active in the EU within a very narrow time horizon,” says the expert.

Initially, the measure targeted only large multinational groups with annual revenues of over EUR 750 million. Now any group of companies will be targeted, within maximum seven years from the date of the directive implementation.

The EC also has from now the support of the European Parliament, and it is to also obtain the approval of the European Council, where the governments of the member countries will have a word to say.

 

Mergeți în homepage ›

Publicat la data de 16.4.2018

Lăsați un comentariu


NEWS

ECOFIN / Tax havens list has been updated. Politico: Eugen Teodorovici took EU Finance Ministers by surprise

Finance Ministers of the EU voted on Tuesday at the third meeting of the Council for Economic and Financial Affairs (ECOFIN) chaired by Romania, the… Mai mult

March 15, 15:00, for 15 minutes: Romania really wants highways!

Dozens of companies, mayoralties, sports teams, public figures, organizations and many ordinary people joined the protest "Romania wants motorways". Of course, the country did not… Mai mult

Facebook has removed 30 pages and PSD propaganda accounts in Romania

Facebook announced Thursday that it has closed hundreds of false accounts promoting false content in the UK and in Romania and this is the first… Mai mult

Laura Kovesi, indicted in a second case opened by Magistrates' Investigation Section

Laura Codruta Kovesi was indicted on Thursday in a second case. The section for investigating the crimes committed by magistrates accused her of having led… Mai mult

Gold reserve was still untouched: Populist diversion or another act against the BNR’s independence

The draft law on the so-called repatriation of Romania's gold reserve is either a populist diversion or another attempt to remove gold from the administration… Mai mult

Magistrates’ protest, extended to 80 courts and prosecutors' offices. List of requests

The protest of magistrates from Cluj Napoca. More than 200 prosecutors and judges, with white bands on their arm, came in front of the local… Mai mult

Laws on judiciary, amended again by OUG: judges who were once prosecutors may be appointed as prosecutors

The Government approved on Tuesday an OUG that was not publicly debated, which amends several provisions from laws on the judiciary that refer to prosecutors… Mai mult

"Iceberg" operation: ANAF announces that it selected 487 companies which are to be audited based on risk analysis

Virgil Pirvulescu, Vice President of ANAF at PwC Annual Tax Conference The National Agency for Tax Administration (ANAF) has identified 487 large and medium-sized companies… Mai mult

Commissioner Corina Cretu: There is a risk that Magurele Laser will not be completed during this budget implementation

In the absence of a rapid response from the Romanian Government to the European Commission, there is a risk that Magurele Laser can no longer… Mai mult

Romania joins countries that recognize Juan Guaidó as interim president of Venezuela

The Presidential Administration announced on Friday that President Klaus Iohannis, "as the head of Romania’s foreign policy decisions and Romania's representative at the external level,… Mai mult

AmCham Romania: Counterproductive public policies have reched an alarming level

Further to the message on the impact of OUG 114/2018 transmitted on Thursday to the organizations in the Coalition for Development of Romania (CDR), AmCham… Mai mult

Finance minister stopped borrowing money from the market. Teodorovici: We have funding resources for minimum six months

Minister of Public Finance (MFP), Eugen Orlando Teodorovici, has ordered to stop borrowing operations on the market because MFF would have all the money needed… Mai mult

BNR: If we sold foreign currency to defend Romanian leu, as PSD wants, interest rates would explode and ROBOR would go over 5-7 percentage points

The National Bank of Romania wants a "loyal cooperation" with the Ministry of Public Finance, and that involves a prior consultation with the central bank… Mai mult

Tax on bank assets was not included in 2019 draft budget

The tax on bank assets was not included in the 2019 draft budget, published on Thursday evening by the Ministry of Public Finance (MFP). According… Mai mult