The minimum turnover tax (IMCA) for companies with a turnover above EUR 50 million, which the government was planning to replace but changed its mind and kept in place under the second package of budgetary reforms, is not addressing tax evasion but is hindering investment, hence economic growth, the business community argued in a joint message published by News.ro.
The political support for IMCA is uncertain, but it is most likely to come from the Social Democratic Party (PSD).
The IMCA applies to companies with a total turnover of EUR 200 billion (40% of the total corporate turnover in Romania) and is profoundly harmful to the economy, according to a report against the measure drafted in April by The Tax Institute and backed by then advisers to former interim president Ilie Bolojan (currently prime minister), Dragos Anastasiu and Radu Burnete.
The fiscal consolidation can be achieved best amid economic growth, and this is exactly what IMCA hinders, the business organisations argue.
Instead, the business organisations advocate for cutting spending and fighting tax evasion.
Furthermore, IMCA failed to generate the expected budget revenues, the joint message reads.
The Romanian government initially planned to replace, under the second reform package currently in Parliament, IMCA with a “tax on affiliates,” specifically limiting deductibility of contracts with foreign affiliates, but unexpectedly gave up its plans. The “tax on affiliates” was introduced for companies with a turnover under EUR 50 million, while IMCA was kept in place for large companies (which was the case in the past as well).
The signatory organisations believe that maintaining the IMCA, although it was introduced as a “temporary measure,” raises questions, also from the perspective of revenue collection.
“According to available data, approximately RON 1.2 billion out of the estimated RON 6 billion have been collected. Thus, it is likely that future volumes will be even lower amid the slowdown in economic activity,” the signatories state.
They believe that, at the same time, IMCA “contradicts good practices and international standards of fiscal governance,” according to which “taxation mainly pursues profit and economic substance, not turnover.”
iulian@romania-insider.com
(Photo source: Yunkiphotoshot/Dreamstime.com)
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