Business was good in 2003, judging by the spectacular increase (more than 46%) posted by the revenues collected by the State from the taxes paid by the companies operating on the Romanian market. The 25% profit tax brought more than 1.3 billion dollars in the State's vaults. And the amount could have been bigger, had the profits not been confined by limited deductions for expenses related to the corporate activities, which practically push up the apparently reasonable level of the profit tax.
The Ministry of Finances has promised to cut profit tax down to 20% in 2005. However, Bulgaria beat the Romanian ministry to it and endorsed 19.5% profit tax for this year, planning to cut it down to 15% in 2005.
The higher profitability of Romanian-based companies, together with the changes in legislation that also triggered the elimination of certain incentives (double profit taxes for exporters) and the better tax collection have turned the profit tax into the most dynamic source of revenues from direct taxes for the state budget, up 46 percent as compared to 2002.
At the same time, the almost 24% raise of the gross average wages in 2003, up to 6.6 million ROL, starting from the raise of the gross minimum wages to 2.5 million ROL prompted an 11.4% growth in real terms for the revenues derived from the income tax. However, the growth of this category of revenues is confined by the burdensome progressive tax system, which applies a maximum quota of 40% for incomes that only account for 350 euros. This drives taxpayers to declare small incomes, which fall under the 18% tax category.
The collection of social contributions is still spiralling down, with these revenues having dropped 2.8% in real terms. The quota of social security contributions did drop 5% in 2003 (with the cut being shared by employers and employees), but the decrease did not make a sizeable impact, given the extremely high level to which it was applied.
On the other hand, the imports' boom, which had the authorities worried because of the deteriorating current account, was not that bad for the state budget, which raked in big money from customs duties, excises and VAT for the imported goods.
Thus, although customs duties for several categories of merchandise were cut in early 2003, budget revenues from this source surged more than 19% in real terms, as imports in euros went up 12% from 2002, and due to the cancellation of certain fiscal incentives.
Imports of auto fuels went through the roof (up 286% from 2002), 31% more alcoholic drinks were purchased, whereas the ROL lost 20.3% to the single European currency, which pushed revenues from excises up almost 55%.
Last but not least, the value added tax (the main indirect tax collected by the State) brought 30.5% more money to the budget in nominal terms as compared to 2002. razvan.voican@zf.ro
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