Fiscal relaxation continues with more taxes for natural persons

The Finance Ministry has a surprise in store for the taxpayers – natural persons: the income derived from banking deposit rates and from dividends is to be included in the global income tax as of Q4, 2003.
“In 2003 and 2004, the income tax will come to include all earnings of natural persons,” Finance minister Mihai Tanasescu said yesterday.
The Finance Ministry is rushing to include the two significant gain sources in the global tax as of Q4.
“We shall run a simulation to test the management capacity and, should this expansion of income globalisation prove impossible, we will postpone it for the beginning of 2004,” Tanasescu said.
The fiscal relaxation announced two years ago by the Finance Ministry will thus continue next year, with an increase in the taxes raised from increasingly more taxpayers.
“If rates and dividends are included in the taxation basis, then taxes will obviously go up,” Nicolae Done, director of taxation doctrines with KPMG Romania, told Ziarul Financiar. At present, the final tax for the income derived from interest rates is only 1%, while for dividends it amounts to 5%. All of a sudden, these types of income will come to bear at least 15% taxes. In fact, Tanasescu has promised that the low end of income tax will also be 15%, down from the current 18%. As for the maximal quota, the Finance minister will only say the cut shall be “significant.”
“The impact will be huge. Obviously, it takes at least a year for people to prepare and rethink their savings and investment strategies,” Mihaela Mitroi, tax director with PricewaterhouseCoopers Romania told Ziarul Financiar.
“The cut in the minimal taxation level and the expansion of the globalisation area means that more people will be reached by the global income tax,” Nicolae Done says.
Introducing the income derived from interest rates under the globalisation umbrella may hurt this type of savings, as the real rates will be much lower, meaning that a large chunk of this income will in fact go into the state’s vaults.
“Let’s not forget that interest rates are big in Romania, in nominal terms. People bring money to the banks and the taxation of income generated by rates means in fact big money. This measure can only have a negative influence of the deponents’ behaviour and, even more, can harm the banking system, which is now counting on very large sums of money coming from the population,” said Dan Pascariu, president of HVB and vice-president of the Romanian Banks Association.