THE MINISTRY OF FINANCE AND FOREIGN INVESTORS CAN"T SEEM TO COMMUNICATE SUCCESSFULLY: Yes, yes, followed by no, no

The Ministry of Public Finance (MFP) only took into account a small number of the amendments to the fiscal code proposed by foreign investors, even though most of them were considered reasonable, and the consultation process was underwhelming, the members of the American Chamber of Commerce in Romania (AmCham România) and of the Council of Foreign Investors (CIS) said in a press conference yesterday.

Ionuţ Simion, the vice-president of AmCham, said: "I have made 220 proposals, six months before the legislation was amended, as stipulated by the law, and we have presented them to the Ministry of Public Finance. They were reviewed during technical discussions. Unfortunately, only a small number of them were taken into account by the Ministry of Finance". The proposals of the business sector concerned a few technical clarifications, as well as fiscal policy measures needed to improve the taxation system.

Ionuţ Simion added: "When we talk to them, the people of the Ministry nod their heads and go < yes, yes >, but when it comes to acting on our proposals, they say < no, no >. As for the technical proposals, the attitude of the Ministry of Finance is surprising to us, because this kind of behavior comes from people who implement the law. We think it is very hard for the people in the ministry to understand the way their colleagues in the ANAF construe the law. I find it hard to understand why they don"t enact these measures".

Lawyer Gabriel Biriş said: "They (ed. note: the Ministry of Finance) don"t want to take on responsibilities", and most of the time, they do not understand the measures which presented to them by specialists.

Şerban Toader, the vice-president of the Council of Foreign investors (CIS) hopes that the authorities will eventually take the proposals into account: "Only a small number of the suggestions were included. We look towards the future with optimism".

We hope there will be as few government ordinances passed without consulting with the business sector as possible and we hereby express our hope that the rest of the proposals will be included into the rewritten Fiscal Code, which should be enacted in the beginning of next year".

• Ionuţ Simion: Improving tax collection would bring 12 billion Euros to the state budget

The average European rate of tax collection is 42-44% of the GDP, whereas in Romania, the average number is 10% smaller than that, says Ionuţ Simion.

The officials of AmCham and CIS claim that the amendments to the Fiscal Code proposed by foreign investors are intended to improve the taxation system and that there can"t be any talk of new taxes if the tax collection rate doesn"t improve.

Ionuţ Simion, the vice-president of AmCham Romania, said that increasing the tax collection rate by 10% would lead to an additional 12 billion Euros to the state budget. Mr. Simion, who is also the coordinator of the proposals to amend the Fiscal Code and the Fiscal Procedure Code drafted by the AmCham and CIS, added: "Imagine how many highways could be built with that money".

• Gabriel Biriş: "Romania needs to stimulate investments, not tax them"

Foreign investors want buildings to be taxed according to the purpose they are used for, instead of the type of owner (individuals or legal entities). Lawyer Gabriel Biriş said: "The way the building tax is implemented creates competitive distortion between individuals and companies because taxes can be even 100 times as big in the case of companies than they are for individuals. We do not think that the taxation of company owned-buildings at a rate of 1.5% of the building"s market value makes any sense. This is a tax on the investment, because it is calculated using the accounting value, and 1.5% of the market value of the building is a huge amount, because it is applied to a very big taxation base. Romania needs to stimulate investments, not tax them".

According to Mr. Biriş, the taxation system punishes those who invest in buildings, an a solution to this problem would be to introduce taxes on the habitable or commercial space, rather than on the type of owner, like it is currently being calculated: "A fixed set in advance taxable value, adjusted based on location, can be more efficient than the market value."

Foreign investors consider that the decision to raise taxes for the companies that do not reevaluate their buildings is "ridiculous", because the real estate market fell.

"This measure is ridiculous, because any company that reevaluates its buildings will do so downwards, because the crisis of the real estate market has caused the value of real estate assets to fall. This will cause a drop in budget revenues", said Ionuţ Simion.

• Dan Schwartz: "We do not want to be a nation of salaried workers, but rather to be able to freely express our opinions on the environment that we want to work in"

The proposal of foreign investors concerning the taxation of earnings are considering, among other things, certain technical adjustments of the legislation, as well as fiscal policy measures, which could be implemented without an impact on the state budget. These include allowing companies to choose the fiscal year, as well as granting certain exemptions to companies, in order to encourage the use of holdings.

When it comes to income taxation, the proposals of the Council of Foreign Investors (CIS) and Amcham Romania concern clearer regulation of dependent and independent activities. "This is an area of uncertainty in the Fiscal Code, dependent and independent activities need to be clearly defined (...). We are in the middle of a process of transition towards the development of the entrepreneurial spirit. These provisions discourage free initiative and risk taking", the representatives of investors say.

Other proposed amendments of the Fiscal Code concern the capping of the VAT base, extending the cap to the healthcare and unemployment funds, the harmonization of the legislation for VAT and excises, as well as the solving of the problems concerning the taxation of buildings.