Romanian Lump Sum Tax Might Reach 28% Of Firms’ Revenue – SMEs Council

Council head Ovidiu Nicolescu said a case study based on the calculation method proposed by the ministry in the draft amending the country’s Fiscal Code indicates the lump sum tax for a 240-square meter restaurant in a rural area will amount to 24% of total gross revenue, whereas the lump sum tax for a class A 240- square meter restaurant in town will reach 28% of total gross revenues. Nicolescu stressed the difference is huge compared to the 16% flat profit tax levied on net profit, not gross revenue.

He added that a lump sum tax of 24% or 28% of gross revenue translates into excessive taxation.

„We want calculation methods to be highly explicit for all CAEN (Classification of Activities in the National Economy) codes subject to the lump sum tax, while the amount of the lump sum tax must not be higher than the 16% flat profit tax, so that the 16% flat tax can be kept,” said Nicolescu.

He underscored that it is not at all a good idea to levy the minimum tax in 2010 or 2011 either, considering the economic crisis and the fact that the Finance Ministry made no study on the impact of the tax, which, if applied during the crisis and based on no impact studies whatsoever, will only push companies into bankruptcy.

Council representatives also requested the lump sum tax be levied for a maximum revenue ceiling of EUR35,000 and called on the authorities to account for their decision to levy the tax in 28 fields of activity.

„We have no official information whatsoever that the introduction of the lump sum tax might be put off. All we know is that the IMF asked the Finance Ministry to revise regulations behind the minimum tax after they learned about its devastating effects,” said Nicolescu.

The minimum tax has proven a certain revenue source to the state budget and is estimated to bring in 0.6% of this year’s tax collections, while the proposed lump sum tax is not easily quantifiable, Romanian business newspaper Ziarul Financiar reported Wednesday.

The minimum tax, introduced nearly one year ago at the IMF’s recommendation to increase budget revenue and cleanse the business sector of inactive firms, led to the halt of activity of over 130,000 businesses and the dissolution of several thousands.

In December 2009, the Government reconsidered the tax and said it planned to levy a lump-sum tax on certain types of activity. Early this year, Finance Minister Sebastian Vladescu said the lump-sum tax was to be levied as of July 1, but now says the timeframe is not set and the Government isn’t in any hurry to introduce this new tax.