Warnings Issued by Romanian Tax Experts Regarding Proposed Tax Overhaul

Romania's Tax Reform Bill Sparks Controversy

The tax reform bill, part of the second package of reforms planned by the Romanian government, is set to be legislated by the end of August. However, the proposed reforms have been met with criticism from various quarters, most notably the Romanian Chamber of Tax Advisors (CCF).

The CCF, in a message published on August 21, expressed concerns about the negative economic impact and ambiguity of the tax reforms in a draft law published for consultations on August 14. The CCF argues that radical provisions in the tax reforms proposed by the Finance Ministry can be addressed using existing instruments.

One of the contentious issues raised by the CCF is the limited deductibility of four categories of intra-group expenditures. According to the CCF, these provisions make it impossible for businesses to operate using common business models. Moreover, Doru Dudaș, president of the CCF's fiscal committee, contends that these provisions contradict EU, OECD, and other international treaties.

The CCF also questions the origin of the proposed tax reforms and argues that they do not reflect the doctrines of any of the four political parties in the ruling coalition. The reforms are seen as economically harmful and partly breaching international agreements by the CCF.

The CCF's concerns extend to the ban on financing companies under financial strains through loans from shareholders. Doru Dudaș states that financing through loans from shareholders is often the best, if not the sole, solution for companies in financial difficulty.

If the issues raised by the CCF are valid, particularly those concerning international treaties, addressing them could defer the endorsement of the second package of reforms, which has already been deferred twice. The reforms do not align with the Hungarian party's preference for balanced economic developments, as argued by the CCF.

The CCF's message includes detailed recommendations to improve the draft law. The reforms do not achieve the social justice doctrine of the reformist Save Romania Union (USR), according to the CCF's indirect conclusion. The tax reforms proposed by the Finance Ministry do not reflect the doctrine of any of the four political parties in the ruling coalition, according to the CCF.

It is important to note that the tax reform bill is not the only component of the second package of reforms. Other important chapters pertain to reforms in the public administration and state-owned enterprises.

As the deadline for the legislating the second package of reforms approaches, it remains to be seen how the government will address the concerns raised by the CCF and whether the reforms will be endorsed as planned.