Foreign investors recommend lowering Social Security contributions and VAT

The Romanian authorities should streamline the tax collection process, lower the Social Security contributions and the VAT rate, according to the suggestions included in the current edition of the White Book, which was launched yesterday, by the Foreign Investors Council (FIC).

"Tax collections should become more effective", Daniel Anghel, treasurer of the FIC and tax partner at "PricewaterhouseCoopers" Romania said.

He added that the business environment didn"t want the raise of the VAT, which should be brought back to 19%, because higher state budget revenues "should not rely on higher taxes".

"The VAT hike occurred basically overnight, without the business environment being ready", according to Daniel Anghel.

The FIC estimates appreciates the capping of social security contributions to a minimum of five gross salaries, because this would stimulate hiring, but social security contributions are high compared to the benefits.

"Social security contributions (ed. note CAS) represent a significant expense for employers, which could represent a hurdle towards making new investments in Romania. Further cuts of the contributions could stimulate companies to hire people, which would eventually lead to higher social security earnings", according to the White Book.

Daniel Anghel warned that there is a need for the introduction of the holding legislation. Its absence could stop economic growth, and groups of companies are forced to move their profits to other jurisdictions, which have this kind of regulations, he added.

Some of the recommendations of the FICs in the fiscal field include the full exemption of reinvested profit from taxation, and the elimination of the prefinancing of VAT on imports, in the case of goods imported from outside the EU.

The White Books is published once every two years by the FIC. The document presents a review of the progress recorded in the main 11 areas which impact the business environment, such as taxation, environment, agriculture, energy, law, European grants, labor market, the public sector, infrastructure, good governance and business ethics.