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Romania Considers Progressive Income Tax

by Ulrika Lomas,, Brussels

11 July 2017

The Romanian Government is considering replacing the flat tax on corporate income with a tax on turnover as part of a wider tax overhaul.

The proposals form part of the Romanian Government's new fiscal plan, announced recently by Prime Minister Mihai Tudose, and could be put in place as early as 2018.

Corporate income in Romania is currently taxed at a single rate of 16 percent, but this could be replaced by a progressive tax on corporate revenue of one to three percent.

The Social Democrat Government has also proposed a solidarity tax on monthly incomes exceeding RON13,600 (USD3,600).

Furthermore, the Government intends to delay a planned one percent reduction in the standard rate of value-added tax, currently 19 percent, by one year until 2019.

The plan was announced following the replacement of Sorin Grindeanu with Tudose as Prime Minister on June 29, after the former lost a confidence vote. Grindeanu, who had been in the job only six months, was accused of failing to deliver on the Social Democrat party's plan for government.

However, the fiscal package drew sharp criticism from the American Chamber of Commerce in Romania, which said that the plan has been drawn up in "haste" and could cause "turmoil" in the business climate.

AmCham Romania is particularly concerned about the proposal to replace the current corporate tax with a turnover tax, which it described as "inappropriate."

"Such [a] mechanism is generally used as a tax simplification procedure for startups and small businesses. Moreover, the proposed measure conflicts with the [proposed EU] Common Consolidated Corporate Tax Base, thus placing Romania outside the mainstream EU countries," it said.

TAGS: tax | small business | business | value added tax (VAT) | corporation tax | Romania | tax rates | individual income tax | Tax

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