ANAF restructuring may increase Romanian tax collection, says AmCham

The American Chamber of Commerce in Romania (AmCham), a business advocacy group, fully supports the government’s intention to restructure the fiscal administration unit (ANAF), which may add up to 5 percent of GDP in fresh resources to the current 31-32 percent collected in taxes.

Mihaela Mitroi, president of the AmCham Romania Tax Committee, said Romania nears a financing deal with the World Bank for restructuring ANAF.

“The main objective of this project is to move from the constraint of tax payers to voluntary tax compliance,” said Mitroi. “We want electronic payments to play a central role in the modernization”

Mitroi cited Bulgaria and Poland as countries that have overhauled their tax collection bodies with external support.

Bulgaria ended up with five regional fiscal adminsitrations, after completing a five year restructuring program sustained by the World Bank. It added 5 – 6 percent in fresh tax collection, taking the overall tax collection to 35 percent of GDP, still below the EU average of 39 – 40 percent of GDP.

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Deloitte Romania assisted the National Agency for Fiscal Administration in implementing an EU-funded project meant to modernize tax controls

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“Following the reform of the Romanian system, we hope that we can reach Bulgaria’s level and get closer to the EU,” said Mitroi.

Poland has a EUR 70 million EU-backed program underway that has already generated 1 to 2 percent of GDP in additional revenue.

Cash-back VAT system needs tweaking, fiscal code rewriting

AmCham also suggested changes in the financing of R&D activities and the cash-back VAT system.

Romania has increased the fiscal deductibility for Research & Development (R&D) investments from 20 to 50 percent, in a bid to create bolster job creation and attract foreign investments.

“We want the R&D deductibility to be extended for more situations,” said Mitroi.

AmCham company members warned the cash-back VAT system that was enforced this year exerts pressure on the cash-flow of larger companies and may drastically reduce the business of smaller firms that are obliged to use this system.

Dan Schwartz, Tax Committee member, said this system ran a cost for larger companies which had to update their IT systems.

The cash-back VAT system was touted by the government as a fiscal measure that sustained SMEs and improved the public finances. Schwartz said this has only increased the bureaucracy.

“This measure is most likely to result in the reduction of budget collection,” stated Schwartz. “This system is difficult to apply, bureaucratic, and we can’t see its utility for the point of view of large companies”

He reckons the system needs to become optional, in line with the EU directive.

The Ministry of Finance recently announced plans to rewrite the Fiscal Code and the Fiscal Procedural Code, an initiative supported by AmCham, which has set up a tax force to provide technical recommendations on this topic.

Authorities plan to complete works on the codes this year and should be enforced in 2014. The first fiscal code was written ten years ago.

Ovidiu Posirca