AGORA International Journal of Administration Sciences,

http://univagora.ro/jour/index.php/aijas
ISSN 2359-800X
No. 1 (2015), pp. 33-45
GENERAL CONCERNS REGARDING THE FISCAL POLICY IN
ROMANIA
L.N. Nasta
R. Ivan

Laura Nicoleta Nasta

Economics II Doctoral School, Bucharest University of Economic Studies,
*Correspondence: Laura Nicoleta Nasta, 20A, Dorului, Corbeanca, Romania
E-mail: [email protected]

Rica Ivan
Faculty of Electrical Engineering and Information Technology,
University of Oradea, Oradea, Romania
Correspondence: Rica Ivan, University of Oradea, 1University St., Oradea, Romania
E-mail: [email protected]

Abstract:
The fiscal policy represents an incentive and also an inhibition factor for certain
activities with special impact over the development policy, as well as the taxation system
plays a major role in investment decisions. In the present context, a reform of the taxation and
billing system is required, due to the low efficiency of the system. In order to increase
Romania`s competitiveness in the world hierarchy, it is necessary to implement a reduction in
the number of taxes and the amount of the existing taxes, to encourage investments, create an
honest and competitive taxation system, and properly computerize its entire fiscal
management system.

Key words: fiscal policy, taxation, budgetary revenues, tax obligations;

Introduction
The fiscal policy represents the sum of all fiscal nature decisions, taken by the
political decision-maker factor, for the purpose of insuring the necessary resources to finance
the public necessities and the achievement of economical and social output, in conditions
under which various factors act (C.I. Gliga, 2007).
The fiscal policy is in fact the policy of establishing the public financial resources. It
also sums up all the ideas and strategies translated in legal regulations in order to achieve
the most efficient modalities of establishing and collecting of budgetary revenues.
The fiscal policy according to the government`s options in matter of taxes and bills,
sets the instruments and the procedures with fiscal character in order to determine the
structure, level and the regime of the fiscal facilities.
The fiscal policy represents all the decisions with fiscal character adopted by the
government in order to secure the financial resources necessary in realizing its attributions
(Paul Zai, 2008; Musgrave & Musgrave, 1984).
Regarding the fiscal policy, Dan Grosu Saguna described it as follows: “the largest
and the most prudent science of taxation and billing promoted by the government in order to
assure revenues for the state and for the society, without it being a burden or a serious
damage to the interests and the patrimony of private persons or legal entities” (Saguna,
1996).
 GENERAL CONCERNS REGARDING THE FISCAL POLICY IN ROMANIA
Over time, in Romania the tax policy suffered many changes mostly regarding the
fiscal sustainability of the public sector. With reference to this aspect, it is underlined that “
In our country were registered constantly and continuously small budgetary revenues, the
predominant part in the revenues in the PIB being much lower the EU average (Vintila N.,
Filipescu M.O., Lazar P., 2013).
Through the measures of tax policy it is intended to establish the volume and origin of
public financial resources, methods of drawing fiscal revenues, and modalities for providing
tax benefits (if provided, under what form and to which sector of activities) (Avram M., Avram
A., 2012).
Today at the level of the European Union, there is not an integrated taxation system,
instead a gathering of various national taxation systems. As a result of the diversity of these
systems, appeared the backgrounds of a fiscal competition.
This fiscal competition generates responsible taxation policies, which can contribute
to the increase in the mobility of capital and the liberalization of economies (Mitchell, 2002).
Also, there are many opinions regarding the effects of the fiscal competition on the
mobility of capital and labor force internationally, in correlation with the volume of tax
revenues at regional and national level (Bretschger and Hettich, 2002).
In the context of the existence of these differences between the taxation conditions and
the levels of the imposed contributions among the EU member countries, the main objective of
the EU`s taxation and billing policy is to avoid distorting the competition on its single market
and to control and reduce tax evasion.
In this sense each member state can opt for the most suitable fiscal system, in
compliance with the EU standards.
According to some authors, the EU should have the power to establish and gather
taxes regarding the measures of the taxation policy (Trovato, 2007).
The fiscal policy in the European Union interval suffered in the last years major
transformations mainly in realizing a stabilized taxation and in reducing on medium and long
term the public depts.
In the fiscal policy of the EU member states, 2008 was a turning point. In this way, as
a result of the economical and financial crises, came a drastic drawback in the tax revenues
in all member states along with an increase of the debt degrees and the budgetary deficits. In
this context, all EU member states were forced to adopt measures for diminishing budgetary
deficit by increasing some of the taxes and reducing the public costs.
In the same time were adopted also a series of fiscal measures through which was
intended to stimulate economical activities by granting some tax exemptions and fiscal
benefits, thus the fiscal policy being situated seemingly between two opposite directions, with
different objectives very difficult to achieve.
The period after the financial crises of 2008 was marked by the adoption by each
member state of the EU, of most radical fiscal measures. After 2008 came a change in the
architecture of the taxation in the sense of replacing and consolidating of the fiscal policies
on new foundations of stability, by implementing measures for increasing indirect taxation, as
well as modifications regarding direct taxation and social contributions.
The measures taken were imposed by the transformation of the financial and
economical crises into a taxation crises expressed in the increase of budgetary deficits
leading to a crises of sovereign debts.
The situation created after the economical crises, was the subject of many themes
approached by studies authored by Tatiana Mosteanu (2008), Nickel, et al. (2010), Walker
(2011), Thornton (2011), Molanescu & Aceleanu (2011).
From the analysis of the fiscal reforms unfolded in the European Union, it can be
observed the fact that there is much effort put into modifying the taxation systems of member
state with an accent on creating new jobs, economic growth and insuring correctness.
 Laura Nicoleta Nasta - Rica Ivan
Also it was and still is put a special accent on fighting the tax evasion, many EU
member states concentrating on fiscal reforms through which the competitiveness can be
stimulated.
The activity reports in the fiscal field published by the European Committee, present
the achievements of EU in this field along the fiscal aspects that have to be adopted further
on.
As a result, the system of public resources in Romania is independent of the EU public
resource system, this independence being materialized through the inputs and outputs of cash
flow in and out Romania`s government budget, in favor of the EU`s budget.

1. Fiscal policy and discipline

The government`s fiscal policy is associated with the power of collecting bills and
taxes. The fiscal policy was defined as being “the art of determining general characteristics of
taxation considering the economic and psychological data offered by the society”.
The fiscal policy represents “the use of budgetary expenses and taxes in a manner that
influences the national economy” (Horton Mark, 2009).
The fiscal policy designates “the concept, measures and the actions of the government
regarding taxes and their role in forming the budget revenues, and the financing of budgetary
expenses, types of taxes, their collection and use as encouraging instrument for economical
growth” (Dobrota, Nita, 1999).
As integrated part of the states economical policy, the fiscal policy establishes
according to the choice of each state, the proportions between the direct and indirect taxes, the
share of taxes and bills in revenues, in order to affect the economic growth. The fiscal policy
includes the ensemble of ideas and strategies translated in legal rules of establishing and
collecting budgetary revenues.
The fiscal policy aims to realize the imposed objectives, influencing also the
development policy. At the same time, the fiscal policy is an act of decision through which it
is intended the reduction of fluctuations and the instability of the economy, the stimulation of
growth and also the protection of the economies and incomes of the consumers.
In a market economy, the taxation system represents “one of the most important
instruments of fiscal policy used by the government in all its social and economical activities”
(Ioneci M., Marcu N., 2007).
Modern society can`t survive in the lack of tax liabilities and their payment. Taxation
defines a system of principals, rules and legal standards regarding the correct appliance of
taxation legislation. In every society taxation is necessary, as it is a governments intervening
instrument in economy.
Taxation represents a complex domain, also very dense, precise, legal by excellence,
because the problem of taxation relies on the legislation adopted in this field, and also opened
towards other law branches (M.S. Minea & C.F. Costas, 2008). It is considered by the tax
payer as a constraint exerted by the predatory government which – throughout special
methods – pulls out of the citizens pockets various sums of hard earned money, so well
deserved by them (M.S. Minea & C.F. Costas, 2001).
In the last two decades, in Romania the taxation system suffered the most changes, the
Romanian fiscal society being perceived by the tax payers as a factor of instability the
development of the local economy.
The fiscal discipline is an essential component of the financial discipline, which
defines the behavior through which are respected a set of rules of financial conduct. The fiscal
discipline and the financial stability must become a state of normality in Romania (Mugur
Isarescu, Governor of the National Bank, July 2015).
The fiscal policy and its modifications affect the tax payers which represent the main
component of the taxation system. The degree of compliance by the tax payer is influenced by
 GENERAL CONCERNS REGARDING THE FISCAL POLICY IN ROMANIA
the number of bills and taxes (Paying Taxes 2008, The Global Picture, World Bank and Price
Waterhouse Coopers).
The degree of compliance by the tax payer is influenced also by the inexistence of
reduced taxes and the lack of a non bureaucratic and simplified taxation system. In this sense,
the taxation system must be based on a state – tax payer partnership. An important instrument
in consolidating this partner-ship, is the correct and stimulating taxation of global incomes.

2. Particularities of taxation policy in Romania

In our country, as a result of the necessity to adapt to the needs of the market
economy, a series of changes were registered at taxation legislation level. After 1990,
Romanian taxation system achieved serious developments as a result of joining the European
Union.
The taxation system in Romania is characterized as a low degree of tax collection, an
inefficient management of taxes, an excessive bureaucracy and high tax evasion. Also the
taxation base is relatively low but with many exceptions and legal benefits.
Regarding the payment of bills and taxes towards the state, in 2013 Romania was
situated 134-th from 189 nations and in terms of regulating the business environment situated
on 73-d place. As bills and taxes, a company in Romania does a number of 39 payments, for
which looses almost 200 man hours (Report “Doing Business” of the World Bank, 2013).
Regarding the competitiveness ranking, in 2013 Romania was placed 146-th among
148 nations measuring the effect of tax collection on the work environment and as 136-th
concerning the effects of tax payments on investment motivation (World Economic Forum,
2013).
In 2014 respect the rest of the East European countries, Romania climbed in the global
competitiveness ranking made by the World Economic Forum, from the 76-th to the 59-th
place among a total of 144 countries (Ziarul Financiar, 2014).
Concerning the bills and taxes, Romania can`t be compared with none of the Western
European countries, as their fiscal policy is based on increasing taxes and less on the
rationalization of public expenses. In 2012, Romania had the lowest taxation burden in the
EU, along Lithuania, Bulgaria, Latvia, Slovakia and Ireland (Eurostat, 2012).
In 2014, in our country were collected no less than 39 various bills and taxes, among
which 4 taxes on profit and 12 taxes over work. Meantime in other member states of the
Union the number of taxes didn`t exceed 10, while for example in Sweden and Norway, in
both the countries the investors were paying no more than 4 taxes / year. In France business
men who own companies pay only a number of 7 annual taxes, and in Denmark only 10.
In 2015, the number of payments descended considerably to 14, and that of necessary
hours dedicated to tax payments has been reduced to 159 hours/year, but the total amount of
taxation reached the level of 43.2% (Paying Taxes 2015, The Global Picture, World Bank and
Price Waterhouse Coopers).
According to the same reports in the 2006-2015 period the values of the total taxation
level, the number of payments done, as well as the number of hours necessary in order to
comply to the fiscal legislation in state, had been reduced significantly, especially the number
of payments required, from 113 (in the 2008-2012 interval) to 41 payments (in 2013), 39
payments (in 2014) and finally to 14 (in 2015) (Paying Taxes 2006-2015, The Global Picture,
World Bank and Price Waterhouse Coopers).
The number of work hours necessary to carrying out the tax obligations also
descended from 222 hours/year which was the highest level reached in 2010-2012 period, to
159 hours/year in 2015. These diminishes came also as a result of introducing of a new
electronic system which permits along side the depositing of documents also the payments.
Between the years 2006-2015 the share of taxes over work from a total of taxes
supported by a legal entity stayed over 70%, with the lowest rate registered in 2013 – 71.27%,
 Laura Nicoleta Nasta - Rica Ivan
and the highest level being reached in 2009 when it was situated at 80%. (Paying Taxes 2006-
2015, The Global Picture, World Bank and Price Waterhouse Coopers)
In 2013 Romania registered the lowest rates of fiscal and non fiscal revenues in its
GDP that year representing only 32.7% when the level of taxes and health insurance
contribution were at 27.5%, lower even that of Hungary (38.6%), Slovenia (37.6%), Czech
Republic (35.3%) and Poland (31.8%) (Fiscal Committee, Annual report 2013).
Regarding the taxation of profit, Romania was situated 7-th among the 10 Central and
East European countries, registering a slight increase in the collection rate of taxes respect the
precedent year. The rate of efficiency in health insurance contribution taxes was at 72%,
Romania being ranked between the last among the east European countries (Fiscal Council,
Annual report 2013).
Particularly Romania`s taxation system compared to other EU countries stands at a
low level.
Regarding the flat tax on income which is 16%, Romania is situated after Bulgaria
with a level of taxation of 10% and Lithuania which has a level of flat tax of 15%, and
considering the level of taxation on profits (also 16%), Romania at European level the
situation is the same, being situated after Bulgaria (10%), Lithuania (15%) and also Hungary
(16%).
But the VAT quote in Romania is one of highest at European level (third after
Hungary with 27%, Sweden and Denmark both with 25%), and regarding the rate of the
social security contribution, our country is situated in 8-th place in Europe. In consequence,
Romania`s taxation quotes on VAT and health insurance, but very low on profit and income
in comparison with other European countries.
Romania sits on the lowest ranking among central and east European countries
concerning tax payments (“Doing Business” report of World Bank, 2013).
The number of tax related payments/year that a company in Romania has to do is 39,
which is a very high level comparing to other central and east European countries. Therefore,
a Romanian company makes 12 payments/year for VAT taxes and same for social security
taxes, when in most of the central and east European countries according to the World Bank
methods, these two payments are done at the same time once, electronically by almost all the
middle sized companies.
If Romania would ensure the declaration and electronic payment of these taxes (health
insurance, tax on profit and VAT), the number of payments would go down from 39 to 14.
Although at first glance the level of taxation in Romania can be competitive at
European level – from flat tax point of view – the economical practice demonstrates the
opposite. According to statistics published by the European Committee, in case of VAT the
level of collection barely exceeds 50% from the sums owed.
The degree of efficiency in VAT taxation in 2012 – 57%, is significantly inferior of
that of Estonia (84%), Slovenia (71%) or Bulgaria (71%). Romania collected in 2012 8.5% of
its GDP from VAT taxes (excepting ESA95), in comparison to 8.32% of GDP in Slovenia,
8.73% of GDP in Estonia and 9.15% of GDP in Bulgaria, given that in these countries the
VAT rate was at the time 20% (respect 24% in Romania at the same period) (Fiscal Council
annual report, 2013).
The data of finance ministry reveals a reduction of collection of VAT from 8.1% of
GDP in 2008 to 7% in 20009 and to 7.5% in 2014. The results achieved in 2011 show a rate
of VAT and excises collection to 12% from GDP, also due to the increase of excise levels as
part of the alignment calendar to usual rates of EU. In 2013 – 2014 period VAT collections
took a descending trajectory, the level being close to that recorded in 2010 (Ministry of
Public Finances, 2014).
 GENERAL CONCERNS REGARDING THE FISCAL POLICY IN ROMANIA
Table no.1 – The evolution of VAT revenue and excise duties (% of GDP)
Year 2008 2009 2010 2011 2012 2013 2014
VAT 8.1 7.0 7.6 8.6 8.6 8.1 7.5

Excise 2.7 3.2 3.4 3.4 3.4 3.3 3.6

Total 10.8 10.2 11.0 12.0 12.0 11.4 11.1

Source: http://cursdeguvernare.ro/wp-content/uploads/2015/02/tabel-11.png
Romania has one of the lowest rate of budgetary revenues in GDP (fiscal and non
fiscal collection), this rate being at only 33.5% in 2012, 11.9% (GDP pp) lower than the
European average (Fiscal Council, Annual report, 2012).
Concerning the fiscal the share of fiscal collection and health insurance contributions
in Romania`s GDP, from the data selected for 2012 presented in table no. 2 results that the
gap between Romania and other EU countries is not recorded at the level of the production
and product taxes, in this case Romania being situated closer to the EU average even then
Germany and Poland. The same time, the level of collection from the taxation of income is
half that of Germany, which is also under the EU average. Regarding the health insurance
contributions, we are situated under the European practice in this matter, it being at 30%
(Eurostat, 2012 ).
Table no.2 – Fiscal revenue structure and health insurance contribution in the
European Union and few of the member state (% of GDP) in 2012:
UE 28 Romania Germany Poland
Taxes on production and 13.6 13.4 11.4 13.1
imports
Product tax 11.3 12.8 10.7 11.6
- VAT 7.2 8.5 7.3 7.3
- Custom duties 0.4 0.5 0.8 0.4
- Other taxes on 3.7 3.8 2.6 3.9
products
Taxes on production 2.3 0.6 0.7 1.5
Taxes on income and 12.9 6.1 12.0 7.2
fortune
-Income tax 12.0 5.8 11.7 6.7
-Fortune tax, etc 0.9 0.3 0.3 0.5
CAS 13.0 9.0 15.8 12.3
-Employers 7.4 5.7 6.8 4.9
-Employees 4.0 2.9 6.4 4.9
-Freelansers and 1.6 0.4 2.7 2.5
unemployable
Source: http://cursdeguvernare.ro/wp-content/uploads/2014/11/tabvel-3.png
The current structure of taxation in Romania is based on greater proportion on
indirect taxes vs. direct taxes. Thus, over 47% of the taxes in Romania come from indirect
taxation (comparing to the EU average of 34.5%), and only 21.6% from direct taxes (where
the EU average stands at 33.4%) (AMECO, Fiscal Council).
 Laura Nicoleta Nasta - Rica Ivan
The indirect taxes remain the main component of fiscal collection in Romania, their
share in total being significantly above the EU average.
The taxation system in Romania is characterized by a faulty collection of taxes, with
an inefficient management and an excessive bureaucracy, a relatively low base of taxation
with lots of exceptions and legal benefits and a high rate of tax evasion (Fiscal Council,
Annual Report 2012).
According to the calculations of Fiscal Council based on data from the
National Statistics Institute, the tax evasion has a very high dimension in Romania,
representing 16.2% from GDP in 2013 (Fiscal Council, Annual Report 2013).
If Romania would collect its bills and taxes at a maximum rate, it would have
budgetary revenues as percentage in GDP, above the European average. Approximately 75%
of the tax evasion is generated at VAT (12.21% of GDP) (Fiscal Council, Annual Report
2013).
According to the calculations of Fiscal Council based on data from the National
Statistics Institute, presented in table no. 3, the degree of collection in case of the income
taxes, taxes on profit, health insurance contributions and excises is around 80%, while in the
case of VAT it is approximately 40%. Now then in 2010, when the legal rate of VAT was
increased from 19% to 24%, the tax evasion on VAT collection grew from 8% of GDP in
2009 to 9.6% of GDP in 2010, maintaining itself at a growing trend also in next years (Fiscal
Council, Annual Report 2013).
Table no. 3 – Degree of collection of revenues to budget
Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Income tax 80 84 85 86 87 81 78 80 82 83
Profit Tax 85 81 79 77 76 79 74 77 79 80
CAS 85 86 85 85 86 79 76 77 78 79
Excise and 79 75 75 63 74 72 68 80 82 81
sin tax
VAT 47 55 65 53 53 45 44 46 41 40
Total 66 70 74 67 66 61 57 58 55 56
The fiscal
evasion (% 6.4 9.5 7.9 11.2 11.0 12.9 15.1 15.1 16.7 16.2
GDP)
of which
VAT 3.0 6.2 4.4 7.2 7.4 8.0 9.6 10.3 12.3 12.2
CAS 1.75 1.74 1.82 1.93 1.82 2.80 3.13 2.87 2.66 2.43
Sursa: http://cursdeguvernare.ro/wp-content/uploads/2014/11/tabel-19.png
As such there is an approximately 13% difference to the EU average, which generates
a 40% deficit in collection respect the present collection rate. The low level of taxation
efficiency in our country is influenced by the self-consumption and the rural market which
hold an important share.
A profound reform of the taxes and bills management in Romania aimed at raising the
degree of tax collection is absolutely necessary, being capable to create the necessary fiscal
interval for the reduction of fiscal burden on employment which is a the very high level at the
moment. A more efficient fiscal policy is realized through the reduction of bureaucracy in
terms of fiscal obligations and increase of the importance of direct taxation.
3. Aspects concerning the fiscal reform in Romania
The fiscal reform, is a component of social and economic reform, aiming to create an
efficient, coherent and balanced fiscal system.
 GENERAL CONCERNS REGARDING THE FISCAL POLICY IN ROMANIA
In Romania, the fiscal policy has been aligned to the EU fiscal system in the matter of
indirect taxation as well as in terms of their share (pp in GDP) in budgetary revenues
obtained. In exchange, the share of revenues from direct taxation is situated below the
minimum registered in the European Union as result of a relatively low rates of flat tax on
profit and income.
In 2004, the basic characteristic of the Romanian taxation system was given by the
applying of differentiated rates of calculating the income taxes for private persons. The
reform proposed by the 2004 government had as objectives a fair distribution of gains
obtained as a result of the economical growth, the strengthening of Romania`s position in
terms of competitiveness and improvement of business environment. Also, the fiscal reform
watched the increasing of the predictability in the fiscal field, the reduction of tax related
costs and a reduction of work taxation.
The process of reforming the fiscal policy continued at the end of 2004 through the
introduction of the flat tax of 16% over salary. Beginning 2005, the government introduced
the flat tax also taxation of profit of legal entities. This new fiscal reform of 2005 aimed the
encouraging of big affairs and large companies with great financial power, increase of
revenues, multiplication of direct investments, the decrease of underground economy and the
creation of jobs.
From 2006, this tax rate extended also over investments income, revenues from
dividends and interests.
These measures led to growing foreign investments (9.1 billion euro in 2006) and an
economical growth of 7.7% in 2006, other objectives remaining unachieved. This way, the
level of industrial production, work productivity in the industry, deficit of current account and
so on, were situated under the level of performances reached in 2004.
The reform of the fiscal system promoted by the post 2005 administration did not
manage to assure the increase of budgetary revenue rates in GDP. The stimulation of consume
in this period had a negative effect over the economical balance deficit, which deepen from
year to year.
Unlike Romanian authorities, which consider that the implementation of flat taxes
brought revenues to budget, the International Monetary Fund specialists consider that this
measure “determined a loss of revenues from income and profit taxation of approximately 1%
of GDP in 2005 (International Monetary Fund, 2006).
From January 1-st 2005, another aspect regulated was that of establishing the level of
debt degree for which is permitted the deductibility of interests, and also it`s calculation as
relation between average value of loaned capital with larger than 12 month due term and the
average value of own capital.
Regarding the indirect taxation occurred modifications in the name of harmonization
with the European Unions taxation system. In this sense were imposed compulsory measures
for all member states regarding the stability of VAT rate in the 15 – 25% range.
Beginning January 1-st 2007, the fiscal code suffered modifications throughout the
coming in effect of long discussed amendments, and the implementation of flat tax of 16%
over incomes and a VAT rate of 19%.
In 2010 at 1-st July as part of a pack of measures for the balancing between levels of
revenues and levels of expenses, correlated with macro-economical objectives and the
process of the harmonization of national legislation and European Union legislation in the
domain, as a member state, Romania registered an increase of VAT from 19% to 24%.
In regional context, according to data provided Fiscal Council, the fiscal policy of
Romania presents itself as follows :
 Laura Nicoleta Nasta - Rica Ivan
Table no. 4 Romanian taxation in regional context
Czech
Romania Poland Slovakia Hungary Bulgaria UE
Republic
Profit tax 16% 19% 19% 23% 20.6% 10% 23.2%
Income tax 16% 32% 22% 25% 16% 10% 38.9%
VAT 24% 23% 21% 20% 27% 20% 21.3%
Social
39.95% 41.19% 45% 49.4% 45.5% 30.3% 33.2%
Contributions
Source: Fiscal Council
One of the concerns of Romanian authorities is simplifying as much as possible the
VAT system and trying to diminish the administrative tasks for the companies.
At the level of tax on profit, fiscal policy in Romania watched its alignment to
international rules in the field concerning transfer costs and costs for legal headquarter. The
rules of taxation over profit realized by the resident companies still remained up to the
Romanian authorities.
As a result of these changes it was achieved a uniformity from the point of view of
taxation of dividends, received by resident companies from EU companies. It was also
assured the fiscal neutrality in the situation of fusion between a Romanian legal entity with a
foreign legal entity from the European Union (Dobrota G., Chirculescu M.A., 2011).
In the 2008 – 2010 period, through the applied fiscal policy, Romania`s government
intended the creation of a non-discriminatory environment, the reduction of contribution rates
to the social security and consolidating the public finance.
After the measures implemented in 2014 consisting in reduction of health insurance
contributions for the employer and also the reduction of VAT for the food products, in 2015
were applied reductions of the main taxes – VAT, health insurance contribution, flat tax – as
well as a series of penalty measures for micro-enterprises, and the introduction of compulsory
payment of social security and health insurance contribution for every private person realizing
revenues.
Romania took another bold measure consisting in the introduction of “holding type”
legislation in 2014, which permits to Romanian legal entities to establish this type of
companies without being taxed for distributed dividends and neither for capital profits, in
conditions in which it would have been desired for some branches to be sold.
In 2015, Romania came up with a extensive reform of fiscal relaxation, by approving
in march 2015 the new Fiscal Code. This new law brings new important modifications
regarding the tax on profit, VAT, micro-enterprises, tax on income, social security
contributions and local bills and taxes.
In 2015, the government changed the strategy regarding taxes, as such in june the
VAT was diminished from 24% to 9% for food and non-alcoholic beverages.
According to the budgetary fiscal strategy for 2015 – 2017 period elaborated by the
government, the fiscal policy is subordinated to the fundamental objective of economical
development, being oriented towards stimulating and promoting investments, entrepreneurial
initiatives and efficient spending of public resources.
On medium term, the government proposed to go on with the measures aimed to
increase the efficiency of the taxation system, reduction of fiscal burden on the low income
working class by implementation of a new system for social security contributions, extending
their calculus base over the entire sector of private persons realizing incomes from
independent activities, no matter if they have also other incomes.
The most important budgetary fiscal measures on the 2015 – 2017 horizon stipulated
by the Law nr.227/2015 regarding the fiscal code are as follows:
-“The tax on dividends is established by applying a rate of taxation of 16% over gross
dividends paid to a Romania legal entity. From 01 January 2017, the rate of taxation fro
 GENERAL CONCERNS REGARDING THE FISCAL POLICY IN ROMANIA
dividends will be 5% (Law 227/2015, art. 43(6), Official Gazette of Romania -
M.O..688/2015).
- The effects of this law doesn`t apply in case of Romania legal entities paying
dividend to othe Romania legal entities, if the legal entity that receives the dividends, holds at
that moment a minimum of 10% from the shares of the vending legal entity, on a period of a
full year till the date of the payment of these dividends. (Law 227/2015 art.23(a), Official
Gazette of Romania -M.O. 688/2015)
- For the determination of fiscal result there are taken into count the deductible
expenses, social expenses being deductible in a rate of max. 5% applied on the value of
expenses with employees salaries. (Law 227/2015 art.25(3), Official Gazette of Romania-
M.O. 688/2015)
- The profit invested in technological equipment, electronic computers and peripheral
equipment, cashiers appliances for control and billing purposes, as well as investment in
informational software, produced or purchased, including those based on financial leasing
contracts, started up, used in the economical activities, are tax-free. Corporate assets which
are tax-free are those provided in the subcategories 2.1 and 2.2.9 from the Catalogue for the
classification and normal durations of functioning for these assets (Law 227/2015 art.22(1),
Official Gazette of Romania -M.O. 688/2015).
- The rate of taxation for the revenues of micro-enterprises is 3%. By exception for
Romanian newly established legal entities, which have at least one employee and are
established for at least 48 months, and the share holders/associates of the company did not yet
owned shares or quotes in other legal entities, the taxation rate is 1% for the first 24 months
from the date of establishment, according to the law. This tax rate is applied till the end of the
trimester in which ends the 24 month period (Law 227/2015 art.51(1,2), Official Gazette of
Romania - M.O. 688/2015).
- If throughout a fiscal year a micro-enterprise realizes incomes that exceed 65.000
euro, or the share of income made from consultancy and management is over 20% from total
income, this micro-enterprise has to pay tax on profit, starting with the trimester in which the
mentioned limits were exceeded (Law 227/2015, art.51(1) Official Gazette of Romania -M.O.
688/2015).
- Modification of the list regarding tax free incomes (Law 227/2015 art.62, M.O.
688/2015).
- The net income resulting from cession of use over goods is established by deducting
from the gross income the expenses determined through application of the 40% share over the
gross income (art.84 align.3).
- The rate of social security contributions are as follows:
a) 26.3% for normal working conditions, from which 10.5% for individual
contribution and 15.8% for the contribution owed by the employer;
b) 31.3% for special working conditions, from which 10.5% for individual
contribution and 20.8% for the contribution of the employer;
c) 36.3% for special working conditions and conditions as specified in Law 263/2010
regarding the unitary public pension system, with its ulterior modifications and add-ons, form
which 10.5% individual contributions and the rest of 25.8% for the contribution owed by the
employer (Law 227/2015 art.138, Official Gazette of Romania M.O. 688/2015).
- For the incomes realized beginning 01 January 2017, in the situation in which the
basic income for calculation exceeds the value of five times the average gross salary specified
at Art. 139 align. (3), the individual contribution for social security is calculated in the
margins of this limit (Law 227/2015 art. 161(2), Official Gazette of Romania - M.O.
688/2015).
- The standard VAT rate is applied upon the base for taxation for taxed operations
which are not tax free or which are not subjected to reduced rates, and its level is:
a) 20% beginning 01 January 2016 till 31 December 2016;
 Laura Nicoleta Nasta - Rica Ivan
b) 19% beginning 01 January 2017 (Law 227/2015 art.291(1), Official Gazette of
Romania- M.O. 688/2015).
- The lowered VAT rate of 5% is applied over the base of taxation for the following
deliveries of goods and provisions of services:
a) school books, books, newspapers and magazines, with the exception of those
destined exclusively and mainly for publicity;
b) services consisting in allowing access to castles, museums, memorial homes,
historical monuments, architectural and archeological monuments, zoological and botanic
gardens, fares, expositions and cultural events, sporting events, movie theatres, and others
apart from those tax free according to art. 292 align. (1) let. m);
- Expression of level of excises in Romanian currency. Thus, beginning with 01
January 2015 the level of excises will be expressed in local currency on the measuring unit
using the level in Romanian currency practiced in 2014. The level of excises established is
updated annually with the increase of consumer prices in the last 12 months, calculated in
September of precedent year , in comparison with the October 2014 – September 2015 period,
communicated officially by the National Statistics Institute by 15 October (Law 227/2015
art,342 (2), Official Gazette of Romania - M.O. 688/2015).
- For residential buildings and annex buildings, property of private persons, the
building tax is calculated by applying a rate between 0.08 – 0.2%, upon the taxable value of
the building. The rate of the building tax is established by decree of the local council (Law
227/2015 art 457(1), Official Gazette of Romania - M.O. 688/2015).”
4. Conclusions:
The fiscal system has an important role in achieving social and economical objectives
by the state.
The re-projecting of the fiscal system is imposed, in a manner in which it would be
possible to put a strong accent on creating new jobs, economical development and increasing
exports, but essentially a system that insures correctness.
At the level of Romania economy, it`s needed a real financial reform, so, at the same
time with the reduction of bills and taxes, also must be reformed the system of the expenses of
public resources , as well as reforming the system of collection, financial control and the fight
against tax evasion.
A profound reform of tax administration in Romania oriented towards increasing the
degree of tax collection is imperative, this being realizable by combined efforts for upraising
the voluntary conformation and essentially reduced tax evasion.

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 Laura Nicoleta Nasta - Rica Ivan
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