Confronted With The Minimum Profit Tax, 100,000 Companies Dissolved Or Suspended

Approximately 100,000 companies closed or suspended operations in the first half of the year following the introduction of the minimum profit tax also known as the lump sum tax. Concurrently, the number of self-employed professionals, who are not subject to the minimum tax, has increased significantly. Specialists say many more small companies will close in the near future.

"The approximately 100,000 companies that closed or suspended operations in the first six months of 2009 is simply the statistic released by the National Office of the Trade Register. However, the number of self-employed professionals increased by 30% in the same period. It is quite possible that the total number of companies that close or suspend operations this year may further increase," said Luminita Ristea, Managing Partner of Nexia International.

• Specialists advocate luxury tax

As the minimum profit tax was intended to function as a source of money for the State, Ristea believes that a luxury tax would be very necessary in the current economic context. "Luxury is currently not taxed in Romania. There should be a correlation between someone"s revenues and the luxury they display," Ristea added. Lawyer Dinu Petre, a Partner with Cunescu Balaciu & Asociatii, shares this opinion. He believes that a luxury tax would be most welcome during the current times of financial uncertainty.

• Number of litigations and bankruptcies to increase

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Dinu Petre believes that the number of litigations and bankruptcies will increase in the near future, despite the Finance Ministry"s attempts to control the insolvency procedures in order to prevent abuses.

"One of the effects of the current economic crisis is that the number of insolvency cases has increased. However, the state of insolvency will be made public and written down in the company"s fiscal record," Petre added.

"Moreover, the State has regulated the procedure for foreclosing on overdue debts to the state," he warned, explaining that the State wanted to collect taxes faster, even if the debtor was unwilling to pay.

Referring to Ordinance 46/2009 increasing the prerogatives of the Financial Audit Corps, Dinu Petre stressed that the measure was intended to "regulate the status of inactive taxpayers and enforce harsh penalties for matters related to taxation."

Specialists believe that, as the economic crisis is taking a high toll on the State"s revenues, the Finance Ministry"s main concern is to increase revenues, primarily by countering tax evasion.