Romanian government retests idea of taxing restaurant tips 4 years after failed attempt

The Romanian government will introduce a new tax on tips in restaurants and hotels, four years after a first attempt failed due to poor fiscal management.

The idea was discussed by the Finance minister Eugen Teodorovici with business owners in the tourism industry and the measure could be introduced in September.

A draft bill will be proposed by the industry by the end of August.

According to tourism industry’s representatives, the measure was proposed in order to increase employees’ earnings and improve the stability of the workforce.

The Ministry of Finance estimates that taxing tips could boost fiscal revenues in a moment of a large fiscal gap as the government is running out of resources to cover soaring spending on wages and pensions.

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The idea of taxing tips was first discussed at the beginning of 2015, when the government adopted an emergency decree forcing businesses to register tips on a separate fiscal statement and pay a 16 percent income tax on them.

The government canceled the measure a few weeks later as the Romanian fiscal tax agency, reputedly unreliable and corrupt, was unable to ensure decent revenue control.

However, the tourism industry supports the idea of taxing tips as it will increase voluntary compliance and payment of tips by credit cards.

“At this moment, a tip paid by credit card to an employee is considered salary income. This means that it is taxed by almost 60 percent. What the industry wants today is the regulation of tips, which means that for a tip of RON 100, the tax will be 10 percent. That means 10 percent will go to the state and 90 percent will remain with the employee,” says Daniel Mischie, general manager of a restaurant chain.