Apart from the announcement that the 16% tax will be levied on all revenues by individuals as of January 1 2006, a new tax on gains made from equity transactions and income derived from interest rate payments is contained in the latest draft of modifications to the fiscal code.
Ionut Popescu, the minister of finance, has promised that the emergency ordinance will be passed by the government on Thursday, meaning it can be published in the Official Gazette on Friday March 25, one week ahead of its coming into force.
The procedure whereby the new tax of 10% will be levied on gains derived from interest payments and equity transactions or fund units obtained after April 1 has already raised several questions.
The draft ordinance now reads: "The level of tax to be applied to gains from incomes in the form of interest payments and equity transfers is to be determined on a pro-rata temporis basis using a 1% level for the period up to March 31, 2005 and the level of tax stipulated by law after April 1, 2005". That level of tax is 10%.
Put more simply, the authors of the changes are planning a differentiated taxation of gains depending on the period in which gains were made - before and after April 1 - but without taking into account the reporting against a benchmark price for equity on March 31, as originally intended. Only the purchasing and sale price will now count.
The minister of finance gave an example of the new system to stock market players: "I paid 100 ROL for some stock three months ahead of April 1. I sell the stock one month after April 1, so I have owned it for four months. The pro-rata temporis taxation means that a 1% tax will be levied for 75% of the gain derived and the rest subject to a 10% tax." Popescu says Andrei Siminel, chairman of the association of brokers, has assured him that no problems will arise on the market, since it merely involves an adjustment to IT programs.
The same principle is supposed to apply to taxes on incomes from interest payments. Bankers were not very upbeat about the news, however, with regard to the swiftness of the change to the 10% tax.
"The ministry has not drawn up any regulations for the new 10% tax. There have been whole discussions, but some clear provisions must emerge about the way the increased tax will be paid, whether monthly or annually, and about the way taxes are to be calculated depending on maturity terms for banking deposits because some deposits were constituted ahead of this decision and are due on a date subsequent to the date the new tax comes into effect," said Radu Ghetea, chairman of the Romanian Association of Banks.
razvan.voican@zf.ro
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