Over 2,500 Companies In Galaţi Suspend Operations To Avoid Lump Sum Tax

Marilena Dinu,Galaţi

The number of companies registered in Galati County that decided to suspend their operations for the following three years has increased from 677 at the beginning of the year to a current 2,559, including 319 self-employed professionals. According to Marian Filimon, President of the Association of Small- and Medium-Sized Enterprises (PIMM) in Galati, most of the companies in question were not prepared to face the effects of the crisis and the sudden introduction of the lump sum tax forced them to freeze the business temporarily as they did not have the liquidities to pay a tax ranging between 500 and 10,000 EUR/year, depending on the value of the turnover.

Given the circumstances, Marian Filimon warned again that Pogea"s tax (i.e. the lump sum tax named after Finance Minister Pogea) was extremely detrimental to the economy and of the nature to severely affect small enterprises across the country, which were being forced to freeze operations in increasingly higher numbers. Filimon also pointed out that the economy of Galati County was currently in financial deadlock because of belated VAT returns from the State, some companies awaiting to collect as much as tens of millions of RON.

"The small companies that have been forced to freeze their business used to contribute to the State finances by paying VAT, even though the profit tax collected from them was insignificant. They had their role in the economy and could always become the start of further businesses," said the president of PIMM - Galati County. He pointed out that the situation was persisting across the country, as demonstrated by a survey conducted by the National Council of Small- and Medium-Sized Enterprises in Romania (CNIPMM) on a countrywide sample of 1,099 entrepreneurs.

"Between October 2008 and March 2009, over half of the small- and medium-sized enterprises, that is, 57.58%, downsized their business, 23.39% maintained the same numbers, 14.80% went bankrupt and 4.22% progressed. The conclusion is that a substantial portion of the small- and medium-sized enterprises in Romania are facing very difficult problems because of the aggravated economic decline. As in other EU countries, small businesses have been the most severely affected by the crisis, because they are more vulnerable to contextual turbulences than large businesses," reads the report on "The Entrepreneurs" Perception of the Business Environment and the Main Difficulties Encountered in the First Half of 2009" made by CNIPMM.

The report further indicates that most entrepreneurs in Romania believe that the peak of the crisis is very close. "A leading part of the polled entrepreneurs, that is, 24.70%, believe that the crisis peaked in the second quarter of 2009, while 21.25% of them expect the peak to occur towards the end of the year. Some 16.40% say it will occur in the first quarter of 2010, while 11.17% see it in the second quarter of 2010," said Marian Filimon, quoting the CNIPMM report.