Stock market investors ask the Ministry of Finance to introduce annual taxation

Stock market investors are asking the Ministry of Public Finance (MFP) to change the methodology used for the taxation of stock market gain. The Association of Fund Managers (AAF), the Association of Brokers, The Association of Stock Market Investors (AIPC), the Bucharest Stock Exchange (BSE) and the Romanian National Securities Commission (CNVM) have addressed a letter to the Ministry of Public Finance requesting that the taxation of capital gains be done once a year, rather than each quarter, as is currently stipulated in the current version of the Romanian Tax Code.

Dragoş Neacşu, the president of the board of directors of the Association of Fund Managers, considers that the quarterly tax merely encouraged involuntary tax evasion.

He said yesterday: "This type of taxation has caused investors to lose money and waste time. I think that all it did was stimulate involuntary tax evasion rather than bring in additional revenues to the state budget. It did not serve as a solution to the budget's deficit. It doesn't serve investors' interest. The current situation is not one of the "win-win" type, but rather one of the "lose-lose" type. I am glad we succeeded in getting all the players of the stock market to join their forces to try and cause a modification of the taxation method. I hope that this action will yield results".

"The measure therefore affects anyone who buys government bonds shares or bonds or invests in mutual funds, and we notice that we currently have over 200,000 taxpayers who are required to send to the agencies of the ANAF tax statements five times a year (each quarter and at the end of the year) for amounts which most of the time are insignificant. The overwhelming majority of investors have placed their resources in money market and bond funds (December 2011 - 160,000 investors with a total value of over 5,000 million lei)", the letter states.

The Association of Fund Managers, the Association of Brokers, the Association for the Protection of Investors (AIPC), the BSE and the CNVM propose the elimination of the quarterly statement of the capital tax gains and the maintaining of just one annual statement and one tax payment.

For those who invest in money market and bond funds, the associations and institutions of the capital market are proposing a withholding tax, by the brokers/fund managers, on the taxpayers' gains from such instruments. Thus, the taxes will be settled by investors based on the annual statement, according to the document.

Also, another proposal is to allow the electronic filing of the statements and of the electronic payment of taxes on capital gains.

The letter shows that the effort of managing the quarterly taxation is very big and the average amount of the tax is very low (approximately 60 lei), whereas over the quarterly tax payment is less than 10 lei. Thus, the costs of filing the statements and paying the taxes owed are higher than the amounts effectively owed to the state budget.

Furthermore, under the current taxation terms, those who invest in money market and bond funds will go back to placing their money in bank deposits, for which taxes are withheld, the document says.