Despite all the commotion sparked last month by the Finance Ministry, the flat tax is no longer mentioned in the Fiscal Code bill, which is to be debated by Parliament. The Ministry of Public Finance has presented the Government with a form of the project that included the suggestion to replace the current income taxation system with the flat tax as of 2005. In the meantime, the suggestion got eliminated.
Although endorsed by the Government, the law draft had not been registered at Parliament yesterday. Moreover, new “technical” modifications have been made in the past two weeks, at recommendations coming especially from the Legislative Board. Under the circumstances, it is not clear when the parliamentary debates can begin, as long as the Code must first be approved by the Budget-Finance Commissions. However, the Commissions will not be available soon, as they will be busy discussing next year’s state budget draft and the bill on the social security budget. Hence, a potential time crisis. All the more so since the fiscal procedure Code draft is also waiting in line, although it has not been finalised by the Ministry of Public Finances. Last but not least, the Fiscal Code also needs methodology in order to be enacted. Two months before the start of the new fiscal year, the methodological norms have not even been drafted yet. This is likely to create confusion, which will largely affect the taxpayers, all that in the very year the Ministry of Finances was preparing to proclaim the application of stable fiscal legislation.
In late spring, when debates on the Fiscal Code project started, the Finance Ministry did not mention the flat tax. It came out of the blue, in August-September, turning into fodder for political disputes. Then, the Ministry of Finance and the Government gave in to pressure, even before the public had a chance to get the idea. However, there still was the proposal to postpone the replacement of the progressive taxation system by one year. At this moment, the proposal is no longer on paper, as the issue was entirely left to Parliament to discuss. Parliament will also have to consider the principle conflict between the flat tax and the deductions included in the Fiscal Code. Romania may attempt originality here, as well, and apply a mixed system, especially since the Exchequer did not voice plans to apply flat tax for all income categories, as it is the case in the countries that have already enacted the new system.
The Fiscal Code draft is not part of the organic laws. Theoretically, it could be promoted through an emergency ordinance, even under the still valid Constitution, which comprises more restrictions in this regard. However, according with the new Constitution that will enter effect in a few days, organic laws could also be promoted through an emergency ordinance, if the Government invokes an emergency situation in adopting the project.
razvan.voican@zf.ro