The EU Commission published its VAT GAP Study in September 2018. Unfortunately, Romania is at the top of the ranking, losing approx. 6 billion EUR worth of uncollected VAT on an annual basis. The GAP is caused by fraud, avoidance, tax compliance, bankruptcies, insolvencies and deficiencies in the performance of the tax administration. Romania has taken certain measures to reduce its VAT loss during the past few years (reduced rates, reverse charge, etc.). However, the size of the black economy is still relevant (23 percent of GDP).
By: Dragos Doros, KPMG partner,
Alexandru Comanescu, Associate Director, Indirect Taxation Services KPMG
To combat VAT fraud, the authorities have reduced the VAT rate from 9 percent to 5 percent for accommodation, restaurants and catering services, with effect from 1 November 2018. An even greater reduction has been made for access to gyms (classified under CAEN codes 9311 and 9313) as well as for access to amusement parks (classified under CAEN codes 9321 and 9329) for which the VAT rate will be reduced from 19 percent to 5 percent. The reduction is not applicable for the right to use sporting facilities for purposes other than sports (e.g. rental of sports halls for concerts).
This measure aimed both at stimulating the development of these business sectors, but also to counteract the fraud and fiscal evasion that exists with respect to these activities. For instance, the contribution of tourism to GDP is estimated at approximately 1.5% and the authorities and the specialists estimate that this should be at least double if the black economy currently existed in this sector would be eradicated. Considering the positive effect on collection generated by the reduction of the VAT rate for foodstuffs as well as the new requirement for retailers to have electronic cash registers, there are strong grounds for optimism that the authorities will be able to reduce the VAT GAP.
Nevertheless, these measures should definitely be accompanied by others which should help the authorities in creating a fair environment for all taxpayers, modernize and simplify the tax administration system, improving voluntary compliance. The increasing globalization and digitalization of the businesses as well as the need to fight against fraud require an immediate reply from the tax authorities. Therefore, projects like introduction of standard audit file for tax (SAF-T) that is an international standard for electronic exchange of reliable accounting/fiscal data from organizations to tax authorities becomes crucial. Based on the above quoted study, Poland decreased by 3% the VAT GAP (5 billion EUR) by introducing SAF-T in the second half of 2016.