The Association of Businesspeople in Romania (AOAR) has demanded new tax cuts in order for Romania to be able to compete with the other countries in the region in terms of the business environment. AOAR feels the tax cuts announced by the Government are not enough.
“The reduction of profit tax from 25% to 19% may indeed be substantial, but we have a big problem here, in the sense that we are only making comparisons with ourselves, and are failing to take into account what goes on around us. We must not see only the bad things that happened here, but also the situation in the Central Europe,” Florin Pogonaru, AOAR chairman, said yesterday.
Businessman George Copos in his turn said that profit tax should be lowered to 17%-18% to come close to the level in neighbouring countries and reduce the grey economy.
He explained that profit tax in Bulgaria reaches 19.5%, and is to be reduced to 15% next year, while Hungary’s profit tax stands at 16%.
“We believe it is very important to see profit tax at 17%-18%, even if dividend tax goes up, because there are about two million people currently being employed on the black market. The underground economy accounts for more than 30% of GDP,” Copos stated.
Businesspeople are also calling for an additional reduction to payroll taxes, which make many employers fail to declare the real wages paid to their employees.
“We need to strike a sensible balance between labour and capital taxation. Social security contributions need to go down by at least four percentage points over the next period, instead of the two points announced by the Government. The statistics which suggest that 70% of those employed are paid the minimum wage are propagating a lie about society – if you organise a job fair you can’t get as much as a cleaner to accept the minimum wage,” Pogonaru said.
He added that reductions in work force taxation would stimulate economic growth, considering that cutting social security contributions by 1% induces a 0.15% growth in GDP, according to studies by the Romanian Academy’s Economy Research Institute.