Single tax quota project delays Fiscal Code

Finance minister Mihai Tanasescu last week postponed presenting the progress of the Fiscal Code draft before the Government once again.

One of the reasons: the discussions about the replacement of the current five income category taxation system with a single tax quota.

“The option of introducing the single income tax quota is taken into consideration. The problem is to evaluate how the budget needs would be covered. Calculations are still being made for several options,” governmental sources told Ziarul Financiar. The decision is largely political in nature.

Finance Ministry experts run a few simulations to see how the budgetary revenues would turn out in case of a single quota of 16% or 18%. A 19.5% quota represents the last option, which would practically not hurt the revenues at all. However, it would disadvantage those who are currently included in that category of income for which the tax is 18%.

The Fiscal Code draft spread so far maintained the progressive revenue taxation system, with quotas ranging from 18% to 40%.

The single quota would bring out the additional wages paid and not registered anywhere or at least the supplementary incomes that were not accounted as wages. The high taxes prompted very many companies to pay wages at the minimum wage limit in the economy, which came with smaller taxes. They also paid the supplementary incomes in different ways. The problem is that the taxation using a single quota entails dropping the fiscal deduction system, stipulated by the most recent Fiscal Code version in case the income category taxation system maintained. It remains to be seen how the Government will weigh the electoral impact of such a fiscal reform measure. The single tax quota is about to become a very appealing solution for the fiscal authorities in Central and Eastern Europe. razvan.voican@zf.ro