Romania’s Min Tax Caused RON100M Loss To State Budget, Left 56,000 People Jobless - SMEs

"According to an assessment of the National Prognosis Commission the Finance Ministry showed us a few days ago, of the 112,000 companies that suspended activity by September, 26,000 were working and the rest weren't active, so 56,000 who worked in those active companies are out of a job," Florea Parvu, vice-president of the SMEs council, told a news conference Friday.

He said that, according to his calculations, the shutdown of these companies translates into RON300 million in taxes unpaid to the state budget.

"The Finance Ministry said this minimum tax generated revenues of RON200 million to the state budget, which means the state actually lost RON100 million," Parvu said, adding employers consider this tax should be discarded and replacing it with a lump sum tax would encourage tax evasion instead of changing things for the better.

Employers said they think it wrong that the Cabinet proposed by the Prime Minister-designate Lucian Croitoru no longer has a Ministry for SMEs and its activity has been transferred under the umbrella of the Economy Ministry.

"SMEs are very important and they are the most affected by the financial crisis. Scrapping the ministry will not solve the problem of thousands of firms that have shut down in the first nine months of the year. Romania needs a stronger SMEs Ministry, with more resources. This is a strategic mistake and we have sent a letter to Mr. Croitoru and political parties to fix this, said SMEs Council president Ovidiu Nicolescu.

He added Romanian employers meet Tuesday with the IMF mission assessing Romania's bailout loan agreement and will request the elimination of the minimum and that the loan money be directed to investments instead of public sector wages.

Earlier this year, in a move to boost revenue to its crisis-stricken state budget, the government passed an emergency decree forcing companies to pay a minimum annual tax of RON2,200 computed based on total revenues. The tax goes up to RON43,000 for companies with total revenues above RON129 million. Companies turning profit continue to pay a 16% flat tax, but no less than the minimum sum for their corresponding category of revenues.

At the time it was introduced, the government said the measure was temporary but hasn't yet scrapped it.

Romania currently has a caretaker government, which lost a confidence vote earlier this month and the Parliament will hold a vote of confidence for a new proposed government Wednesday, November 4.

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