Profit tax cuts yet to reach Romania

With a standard profit tax quota of 25%, the Romanian companies have to bear heavier fiscal burdens than the enterprises based in the neighbouring countries. For instance, the Hungarian Exchequer claims an 18% tax, which amounts to 20% in Croatia and 24% in Russia. Estonia can afford to skip profit tax altogether.

The taxes paid by Romanian companies are smaller than in the Czech Republic – 31% or Poland – 27% (out of the initial 28% in 2002), but the reality of fiscal aggression in Romania is conveyed by the level of social security contributions and non-deductible spending, that take huge bites out of the companies’ budgets.

“The value added tax level does not always give the whole picture of the financial burden that companies have to bear,” Patrick Leonard, tax partner with KPMG states.

According to Leonard, many Romanian companies are in fact facing a much bigger profit tax than the 25% quota because of the non-deductibility of several spending categories, such as the accounting losses resulted from the sale of fixed assets.

“It would be worth for the Government to consider cutting the profit tax level for companies and to accept more deductions related to the business growth, to improve the competitiveness of Romania as a place worth investing in,” Victor Kevehazi, senior partner with KPMG Romania said in his turn.

Over the past three years, the profit tax quotas have been decreasing worldwide. In the European Union, the average taxing quota went down to 31,68% compared to 32,53% in 2002, while the OECD member states are taxing this year’s profit with an average of 30, 79%, down from last year’s 31,39%.
razvan.voican@zf.ro