After two consecutive years that both started with a so-called “fiscal revolution” and in a context where budget deficits have tended to deepen from one year to another to reach an unacceptably high value (over 3% of GDP), I think the best thing for the Romanian tax system in 2020 would be for nothing spectacular to happen.
Let us hope that the new government will be less “creative” in launching new “tax revolutions” and will follow the common sense idea of a system that is predictable and logically structured, which will only bring some much-needed corrections in terms of tax legislation.
The past two years left behind a random series of legislative changes that were scattered around the tax code but were not an integral part of a new overall tax perspective. This has led to major uncertainties and difficulties in understanding the legislation and, implicitly, to it being roughly adapted to daily fiscal practice.
The insufficiently structured changes in tax legislation, as well as their subsequent corrections, all done in a rush and by ear, implicitly and inevitably led to a significant amount of subjectivity in the way the tax legislation was applied, which can turn even an honest taxpayer into a potential victim of abusive and discretionary interpretations of the legal texts by tax authorities.
That is why I believe that the system should be recalibrated as a whole and rebuilt on a functional basis, in an integrated manner, by eliminating existing redundancies, inequities and inconsistencies. A first step has already been taken, through the elimination of the overtaxation of parttime employment contracts and the repeal of the VAT split system (starting with February 1, 2020). Emergency Ordinance (OUG) no. 1/2020, through which multiple corrections were made to the now famous OUG no. 114/2018 (although in some situations – such as the tax on financial assets – my understanding is that we are only talking about a suspension in 2020, and not a repeal).
Maybe by the time this article is published, there will be some more examples… Because there is still plenty to be done: implementing a law of holding companies from the perspective of fiscal consolidation of profits/losses, transposing European jurisprudence within the fiscal code (in particular in terms of exercising the VAT deduction right) or correlating the fiscal amortisation with the economic one and approaching tax amortisation of fixed depreciable assets as a driver of economic growth.
Of course, there is a lot to be done when it comes to tax procedures. Let us hope that the rule for establishing garnishments within a certain period from the issuance of the order will be followed, based on the taxpayer category and the amounts due, as currently required by the law. And maybe, somehow, the situation of the random checks turned into partial tax inspections will also be regulated.
Furthermore, the more rigorous delimitation of the situations and conditions in which the fiscal re-qualification and reprocessing performed by tax authorities can lead to the elimination of the presumption of guilt being imposed on taxpayers, because the “law of force” cannot replace the “force of law”.
And the final discussion with the taxpayer should no longer be just a formal notion, with only theoretical meaning, and the same can be said about the obligation to provide reasons for a decision to impose (especially when it leads to the reprocessing of the economic substance of transactions carried out by the taxpayer and their reclassification)… Let’s also not forget a promise that is still unfulfilled: making the procedure of classifying taxpayers into fiscal risk groups more transparent.
I’m already aware of “the supreme argument: they can’t do everything at once.” That’s fair and plausible, to some extent. Even if the road is long and the steps are small and timid, it is important that we don’t start off on the wrong foot this time.
We must build a friendly, stable and predictable business environment, governed by a real and honest partnership with public authorities, because if investors leave (and there are plenty of attractive options around us), and are no longer here to “take money out of the country” and to “commit tax evasion”, we will not even have anyone to blame for the predictable failure that comes next.