Fiscal_Politics

Settlement framework The new fiscal alteration will be applied in May 2009- December 2010 and sets out that the firms which record profit will pay a contribution of 16%, but not less than the minimal limit of the business turn-over in which it fits. Other fiscal alterations concern the following: • The pinching of the TVA deductibility when cars and fuel is being bought, which will gain perquisite to the budget up to 348 mil. Lei plus approximately 355 mil. Lei (86 mil. Euro). The IMM taxing grid, included in “Ordonanta de urgenta” which concerns the budget rectification in 2009 is shown above: Total anual income       | minimal anual tax                  (lei)                                            (lei)                +--------------------------------------+---------------------------------------+ 0-52.000                                 |                 2.200                      52.001-215.000                        |                 4.300                  +--------------------------------------+---------------------------------------+ |215.001-430.000                     |                 6.500                 +--------------------------------------+---------------------------------------+ |430.001-4.300.000                  |                 8.600                +--------------------------------------+---------------------------------------+ |4.300.001-21.500.000            |                11.000                  +--------------------------------------+---------------------------------------+ |21.500.001-129.000.000       |                22.000                  +--------------------------------------+---------------------------------------+ |Peste 129.000.001                  |                43.000                +--------------------------------------+---------------------------------------+ Source: Og 34/2009 Monitorul Oficial nr. 249 din 14/04/2009: Other fiscal alterations: • There will no longer be deduced aferent TVA when cars are bought exclusively for road transport, including fuel • Economic operators will be able to deduce TVA for cars used for certain activities, like driving trening school, taxies, leasing • Running cost, maintenance and repairs, excluding those concerning fuel, cars used by managers, will be deduces not more than to 1 car Commitments in the fiscal field negotiated with FMI Assignees of the government have not negotiated with the FMI the anti-crises methods adopted in February, referring the non-taxed profit and the equities reinvested or giving state credit to some companies such as Ford for contraction of credits. The commitment taken towards the FMI, refers to: • Abidance trimestrial target concerning the deficit budget , including the annual one • Adoption till the end of the year the fiscal administration law which will limit budget changes, the law regarding the system payment and the law regarding allowance The minimal inopportuneness assessment Regarding the instauration of the minimal taxing there were many points of view which lead to the question if it’s really justified fiscally speaking. We must admit that the new taxing will affect in the first place small enterprises, they have already reduces their expenses in these times to survive. So, approximately 200000 IMMs will be affected and they will give up their activities and will eventually turn to tax evasion. Another change of the small enterprises will be unemployment; budget burden for welfare will increase. A last change will be noticed in rising of prices on service market. A less optimist alternative may be coagulation of IMMs and a migration of microenterprises towards developing of some independent activities parallel to the restriction of small enterprises in economy. The conclusion is that the minimal taxing encourages tax evasion, discourages new investments and affects the service sector conditioned by the responsibility and the determination of tax control. Minimum tax interpretation according to European community treaty It is important to analyze the changes brought by the fiscal system in accordance to European community treaty. In a FMI document it is said that minimum tax profit, calculated at gross income, is inequitable and it’s turning the economic activity upside down. A quick reaction towards changes brought to the fiscal system is resented by the famous consultant enterprises: PricewaterhouseCoopers, KPMG, Ernst&Young, Deloitte Tohmatsu & Touche. This type of taxing is on the way to elimination in other UE countries Other countries have adopted similar taxes as the minimum one (France, Hungary) in the boom economic periods, when suspicions concerning the tax-payers to increase artificial expenses can be somehow justified. In economic crisis instituting new taxes it totally unjustified. The opinion of the FMI regarding minimum taxing is shown in the study entitled “Tax Law Design and Drafting”,volume 1; 1996; Victor Thuronyi, ed.), Capitolul 12, Presumptive Taxation. In the recently adopted normative act there are some imposing conclusions generated by the shortcomings detained by the promovated fiscal politics: 1. Regarding the minimum taxing - The principle from the article 3 lit.d) from the Fiscal Code is violated. Likewise the immediate application of any modification and not beginning with the next fiscal year is deeply forbidden by 571/2003 law regarding Fiscal Code. - Fiscal principles regarding imposing efficacy through stability ensurance on long-term are broken. Motivated by the fact that these estimations lead to negative retroactive effects. - It’s discriminating because it arranges and settles a similar treatment for tax-payers placed in different situations and also taxing the same way commercial societies which records loses and ones which increase profit. The taxing mode promoted through the taxing of the sales gross is a lacking taxing method because: -involves cascade taxing -it is inequitable -it is not related with the capacity of the taxpayer to pay -it encourages the new forms of the tax evasion and the avoiding of taxes The economical impact of the minimum tax should have been better analyzed because of the negative effects generated which refer to: -discourages the new investments-businesses at the start up have great expenditures register losses but still pay the tax -the minimum tax discourages large investments-the acquisition of the expensive technological equipments depreciated through the accelerated depreciation(method guaranteed by the fiscal code) may cause fiscal losses; the companies which make such investments still pay the tax -the minimum tax affects the services sector, considered strategic for the emerging economies -the minimum tax affects the retail firms which in cases of economical crises have to make discounts and to increase the expenditures with advertising and marketing which leads to real losses -the real estate transactions which are at losses during this period of depreciations of the actives are penalized with additional cost fact which should be avoided during the crises 2. Regarding the formation of the social fund The formation of the social fund from the sponsorship given by the intern producers and the distributors of gases which contribute voluntary at the formation of this fund is not well economical founded .The social fund is due to be collected and distributed during 2009.These sums are generally sums obtained through the increase of the gases price during this year. It is necessary a detailed review of this sector considering the market economy concepts , free competition and the anti abuse measures, not to introduce these or to find other additional state funds using other economical levers. This chapter presented by the ordinance has the risk of contravening the concept of sponsorship described in the law 32/1994 regarding the sponsorship and the text is ambiguous and may be interpreted. There is a serious confusion between social fund and the sponsorship between voluntary and mandatory. The formation of a social fund from the sponsorship given by the intern producers and the gases distributors makes this sponsorship imperative indicating the source of the formation, contrary to the concept of free formation. The fiscal treatment of this sponsorship creates an unjustified difference between the taxpayer we refer to and other taxpayers considering the ambiguous character of this formation. Furthermore this creates a free competition distortion in the energy sector considering that this social fund is addressed only to the intern producers and the gases distributors and doesn’t involve other similar domains from the economy sector such as power and heat. It is not excluded that the formation of the fund to lead towards an increase of the price of the gases .It should be taken into consideration the involvement at the institutional level, the incompatibility of the institution to fix the price. Conclusion The measures adopted regarding the fiscal policy modifications not only they just don’t stimulate the economical activity but also tend to increase the fiscal pressure .The regulations should have been adopted before or after, not during the crises because the side effects would be negative. In the effort to collect additional incomes at the budget there were other ways such as selling the emission rights which could bring to the budget 1 billion euros annual for the next three years. To make the fiscal system more efficient it may closure or reduce 179 of the 489 taxes identified and known as useless by the ministry of public finances. At an analyses of the environment ministry the taxes have been reduced from 102 to 42, at MAI from 55 to 33 , at SGG from 47 to 22, at the ministry of economy from 41 to 25, at the transportation ministry from 40 to 32, at ANSV from 37 to 26, at the agriculture ministry from 31 to 20, at the justice ministry from 30 to 27, at the ministry of culture from 11 to 9. Making the budgetary process more efficient can bring additional resources at the budget by reducing the public expenditures and the restructuring, aggregation or the closure(where needed) of the 224 agents and governmental authorities may be a solution next to those negotiated and accepted with FM in process of development. Bibliography Memorandum from the consulting group of companies Big 4 Pricewaterhouse Coopers, KPMG, Ernst&Young , Deloitte Tolunatsu & Touchecu regarding technical aspects from the Governmental Ordinance form the regulation of financial and fiscal measures in 2009 Law 571/2003 regarding the Fiscal Code Governmental Ordinance number 34/2009 regarding the budget correction for 2009 and the regulation of some financial and fiscal measures.