​PSD and PNL, Ciolacu and Ciucă know what they have to do when it comes to solving problems related to taxation, the Fiscal Code. The problem is who will settle them politically?

That is why they are delaying measures to eliminate tax benefits. Activities are not popular.

Let’s not forget that the exceptions were introduced by the PSD. Whoever put them in has to take them out, right?

What opened the door to exceptions at work was the famous emergency decree 114/2018, passed under Dragni.

*The text was prepared after discussions of HotNews.ro with various experts in the field of taxation

How many workers receive higher wages because of exemptions or benefits

Then (in 2018 with effect from 2019) it was decided that builders would not pay income tax, medical contribution and tier II. Today we are talking about more than 450 thousand people.

This does not mean that only the construction workers will benefit, but also drivers, accountants, HR, etc. who work in those construction companies: all field workers. That’s why they got higher salaries.

Parliament later passed legislation that expanded opportunities for agriculture and the food industry. That’s for about 300,000 other employees on the same model.

The fact that these categories do not pay for health does not mean that they do not bring benefits. Alexander Rafila complained the other day, for example, that there is no money in “Health” due to sick leave. Cholaku seems to have noticed the same thing.

The problem is much broader: there is no money because we have exemptions, and there is no money because those who have these exemptions can benefit. That is, these people are insured: they also use hospital benefits.

These benefits were changed (in 2022) as follows: they apply to salaries from 4,000 to 10,000 lei in construction, and from 3,000 to 10,000 lei in agriculture and food industry.

The other facilities are the ones in IT that everyone knows about (income tax exemption), which if we look at the statements of various people from the Ministry of Finance, about 80,000 people. Now a little more, because recently it also applies to budget IT professionals.

Why are there so few of them?

Because most people in IT prefer to work as a PFA and micro business. There is something more profitable from the point of view of income: fiscal optimization.

So as a PFA they pay contributions of 6, 12 or 24 salaries and as micro-enterprises they have a tax of 1% plus income tax and contributions because they are required to have at least one employee who is paid at least the minimum wage fee, and if the dividends (taxed at 8%) exceed the thresholds of 6, 12, 24 salaries, CASS must also be deducted.

There is another category of people exempt from income tax, which is being studied, but tax experts say that it is practically not used. There are very few who benefit from it.

Threshold for micro-enterprises and Horeca

The threshold for micro-enterprises is still considered an exception to the Fiscal Code. Even if it has fallen to 500,000 euros, it is still considered overvalued.

Firms with 1-2 employees and low income should be considered micro-enterprises. At 500,000 euros, we are talking about a full-fledged business, according to various experts.

We would like to remind you that through the PNRR, we have committed to lower the threshold even more. There are various discussions about a reduction of around €300,000.

The World Bank recommends reducing it to 250,000 euros from 2024.

Horeca no longer pay specific tax as it was removed from the Fiscal Code (from OG16/2022), but they had the option to choose between income tax and income tax. Obviously, the majority chose income, because they pay less (1%), and the profit is much higher.

This is also considered an exception.

Under conditions of low tax in Horeca (see also below), we still have excessively high prices on the Romanian coast. The expert reminded: have you seen how much soup is on the sea? More than 60 lei! That is, with less VAT and less tax, prices rise.

VAT: exemptions due to reduced rates

From time to time there are discussions about the reduction of VAT on various goods. We have food, medicine, photovoltaic panels, in Horeca or fitness halls.

When a preferential VAT rate was introduced in Horeca and in fitness halls, a phenomenon was observed: entrepreneurs did not change the menu, did not lower prices, did not lower prices for a gym membership.

Essentially, these companies enjoy exemptions from the 19% rate.

*from OG 16/2022 VAT in Horeca has been increased from 5% to 9%, but it is still lower than the standard rate

All this VAT was converted into profit. Consumers or customers did not choose anything.

There are discussions in various groups of experts, whether it would be better to cancel these exemptions in the field of VAT, accordingly to decide on a slightly lower rate. The problem is that this will automatically be reflected in the price increase. As a counterweight, one idea would be to lower labor taxes to around 20%.

The World Bank report recommends abolishing reduced VAT rates, such as those levied on restaurants, hotel accommodation, books, newspapers, magazines, museums, zoos, gardens and parks, as well as food, pharmaceuticals, water supplies, firewood and heating.

Something must be done, that’s clear, because the budget has big problems, as evidenced by the implementation of the budget in 5 months. The deficit is too big: 2.3%. Spending cuts alone do not solve the problem, which was also created by inflating revenues based on an exceptional year such as 2022. That is, the budget for 2023 was poorly written.

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