After four months of calculations and talks with representatives of the business community and of the trade unions, the Government during its latest meeting endorsed the fiscal code draft to be enforced next year. The draft, to be sent to Parliament for debate, will abrogate the entire legislation on the taxes and charges due to the State budget, from the profit tax Law, the VAT Law, the Ordinance on individual income taxation, to the Ordinance on excises.
Should we introduce a 23% flat tax as of next year or not? This has been one of the most debated issues over the last three weeks. Backed by Finance minister Mihai Tanasescu and by the business community, the flat tax met with the opposition of President Ion Iliescu and of the unions that felt a single tax quota system would only make social polarisation worse, as it favoured high-income people and disfavoured those with low wages. The latter triumphed in the end, so that the Fiscal Code draft endorsed by the Government is made up of two parts: one which stipulates maintaining the current progressive system in 2004, as well and one concerning the introduction of a 23% flat tax on wages, freelancing and usufruct cession-related incomes as of 2005.
President Ion Iliescu said he had met with PM Adrian Nastase before the Government session, who told him the Cabinet would debate postponing the enforcement of the flat tax. "I told him that was a very good thing, because it would actually help," Iliescu said. He added the Government's decision to postpone introducing a single tax quota was welcome also because of the upcoming electoral period. "We will politicise this measure either willingly or not and this will cloud our judgement and prevent us from seeing things clearly," the President added.
Compared with the current system, the normative act draft endorsed by the Government stipulates new deductions for house redecoration (up to 15 million ROL a year) and for house insurance premiums (up to 200 euros/year). Other deductions include the contributions to the optional occupational pension schemes (up to the ROL equivalent of 200 euros a year), private health care insurance contributions (up to the ROL equivalent of 200 euros/year) and the interest on the mortgage credit contracted for the domicile (up to 500 euros/year).
Non-residents' incomes obtained from freelancing in Romania will be subject to the same taxes as those for Romanian residents in case they are not carried out at permanent headquarters or for more than 183 days in a fiscal year. The representative offices of the foreign companies operating in Romania will pay a fixed tax equal to 4,000 euros a year, which can be paid in two equal instalments every six months.
The Fiscal Code draft merges the three normative acts regulating the current excise regimen, the supervision and licensing regimen and the product marking. As of 2004, the fiscal warehousing will be introduced for alcohol, alcoholic beverages, tobacco products and mineral oils. miruna.lebedencu@zf.ro
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