Negative response to dividend tax raise

Finance Ministry’s plan to introduce a single taxation quota for the dividend-related income for individuals and companies, raised to 20%, has been met with criticism by the business community.
“It is the same detrimental policy a Finance Ministry employee eager to please the boss at the international financial institution would adopt,” Florin Pogonaru, chairman of the Association of Business People in Romania (AOAR) said. He feels this step should come with a profit tax cut or else it might result in businesses closing.
“It is a policy that does not pursue increasing the taxation base by stimulating businesses. For instance, Hungary has to come to levy a 20% tax on dividends, but the profit tax has gone down to 12% accordingly as a reinvest-your-money signal. Whereas here, if the dividend tax were increased without a profit tax cut announced, it would result in businesses closing so that we should neither wonder why nor be angry at multinationals for repatriating their profit, nor at the Romanian business people that go and do business abroad,” Pogonaru added.
The Exchequer’s representatives are actually saying this increase in the dividend tax is supposed to be compensated for by lower wage and profit tax. Bogdan Baltazar, BRD-Groupe Societe Generale chairman in his turn says this step is in fact an attempt to bring up the interest-related income taxation issue.
“I find it to be counterproductive, particularly because it paves the way to the already discussed global taxation. Taxing the banking interests-related income will undoubtedly be brought up again. This cannot possibly be, given that the brokerage level in the Romanian banking system is low and the capital market is still young and lacks investors,” Baltazar said.