Romania to Simplify Fiscal Checks

Several fiscal bodies are to merge into one, in a bid to improve efficiency and lighten the load on companies struggling under the weight of numerous inspections.Romania’s centre-left government plans to merge several fiscal authorities into a single structure in a move to reform the tax system and increase the tax intake.

“We want to simplify fiscal controls on companies that work legally and put an end to activities such as tax fraud and evasion,” Finance Minister Daniel Chitoiu said.

The financial police (Garda Financiara), the fiscal inspectorate, the customs and anti-fraud authorities will all merge into a new body, which will check small and medium companies every three years and bigger companies every five years, instead of carrying out several checks per year as is now the case.

Changes to the tax collection system are also part of the plan, as are changes to several important laws and the law on combating money laudering.

Romania loses millions of euro each year in unpaid taxes. Poor tax collection, VAT fraud and unreported labour are some of the main causes of fiscal evasion, which is estimated to cost around 18 billion euro a year, 15 per cent of GDP.

Analysts cautiously welcomed the new plan. “I applaud simplyfing fiscal checks and procedures. But… new measures imposed almost overnight will reduce predictability and could make new investors reluctant to invest in Romania,” economic analyst Ionel Blanculescu warned.

“Furthermore, the new plan says almost nothing about how the sensitive issue of tax fraud is going to be tackled,” he added.

Of the 590,000 active companies in Romania, some 80 per cent have an annual turnover of less than 100,000 euro. Entrepreneurs and investors complain about the huge number of annual taxes that companies have to pay – some 96 in all.

On the other hand, as a country with a low living standard and with endemic corruption, Romania has turned cheating the state into a tradition, from people not declaring all their income to companies refusing to pay pensions, unemployment or health contributions.

The media often report on ingenious fraudsters who have placed illiterate people at the top of heavily-indebted firms, or on people who live in huge houses that are still listed as “under construction”, so that the owners do not have to pay taxes.