Fostering consultation between authorities and taxpayers could lead to better legislation, while an expanded and more comprehensive tax ruling system can help businesses gauge their future tax liabilities. Meanwhile, authorities should also enhance the dialogue with the business community on tax law amendments, says Mark Gibbins, partner, head of taxation at the professional services firm KMPG.
Gibbins said Romania’s 16 percent flat tax for corporate and personal income is in line with concept used by other CEE nations that maintain lower taxes to encourage investment and clamp on tax avoidance and evasion, aiming to boost tax collection to the budget.
“However, other aspects of the Romanian tax system continue to be complicated, while frequent changes at short notice remain a problem and can be disruptive for business. Nevertheless, a positive development has been that the authorities are increasingly willing to engage in dialogue with the business community and stakeholders,” Gibbins told BR.
The KPMG partner said authorities are expected to intensify efforts to combat tax avoidance and evasion, in line with global trends, as Romania is still trailing Western Europe on tax collection.
“Tax audits have been particularly stringent, focusing in particular on transfer pricing compliance and reclassification of contractual arrangements, with an emphasis on substance over form. This trend is likely to continue, with probable development of further anti-avoidance measures and exchange of information, broadening of the taxable base, increased collection of tax and more aggressive tax audits,” says Gibbins.
The partner commented that the intention of authorities to rewrite the Fiscal Code and the Fiscal Procedure Code “could be a useful exercise, making it clearer and easier to use, in view of the numerous changes which have been made since it was first issued in 2003.”
“We can also expect more migration of tax compliance, reporting and audit systems to the electronic environment,” added Gibbins.
Authorities can stimulate the economy and increase the budget revenue by focusing on stability, simplicity and efficiency, concluded Gibbins, who predicted this year will remain difficult for business.
Mark Gibbins is a key speaker of the Tax & Law Event, organized on March 28 by weekly magazine Business Review. The event hosts a panel of experts that will outline the main fiscal and legal changes that impact the local business environment.