The government wants to tax multinational companies with a turnover of more than 50 million euros, that is, to pay 16% of income tax, but not less than 1% of turnover.

Adrian Luca, first vice-president of the Chamber of Tax Consultants (CCF), says there is also a “less complete” part of turnover taxation.

“I noticed in the press that the Government is getting closer to going to Brussels with a ‘wonderful’ solution of a minimum corporate income tax, especially those that are ‘taking profits out of the country’ and so on. Again, voters are only presented with the full side (“we introduce minimum taxation for fiscal fairness, let everyone pay, big and small”, etc.), not the empty (less full) side of this administrative measure, he says.

What is suspicious anyway?

“The very existence of a system alternative to the standard tax leads to interpretations of horizontal fairness between similar taxpayers: how do we explain that a taxpayer with sales of X euros will be less suspected of tax evasion compared to one with sales of X + 1 euros, since the field itself?”, – asks Luka.

According to him, the tax administration should make sure that the payment of the minimum tax is not seen as a “price” that a taxpayer can pay to avoid paying taxes at the expense of another who reported income, was honest and worked efficiently. .

• “Thus, in the absence of structural reform in relations with its taxpayers based on industry and sub-industry risk analysis, the tax office maintains its high costs of fiscal audits”

“It is in the name of fairness and efficiency that the minimum taxation system must also find a formula (most often through a tax credit) not to penalize companies that should have reported losses due to the objective market situation or because of what they invested. ;

For companies that have losses and pay the minimum tax, this should be seen as an advance on future income tax,” the CCF representative explains.

• “Also for the sake of fairness, the difference between the minimum level and the tax that would have been paid under normal rules should be treated as an advance on income tax for the next X years;”

• “The fact that the taxpayer will have to calculate his obligations in parallel under two reporting systems (standard/minimum tax) or even under three (if they are subject to the global minimum taxation rules of 15%), can significantly increase the costs of compliance with tax legislation”

Turn, blind indicator

“Turnover is a valid indicator of the size of a company’s operations, but it is ‘blind’ (IMF report, 2021) when it comes to the net margin and therefore the viability of that operation,” he argues.

Why

“Two companies may have the same turnover, but different cost structures (and therefore different pre-tax net margins), may be found at different times in the business cycle, and may ultimately be quite penalized by the minimum tax system compared to the standard “, – states Luka.

When you have a low level of profitability or even a loss, he says, “a sales tax that is too high makes the difference between survival and failure.”

Therefore, he said, a minimum tax of 1% of turnover (CA) means that a company must have a profit margin of at least 6% in order not to bring money from home to pay the tax. (taking into account the standard corporate tax rate of 16%).

“But the profitability index is not a ‘one-size-fits-all’ indicator that can be applied to the entire economy, as each industry and sub-industry has its own characteristics. For example, a rate of profit of 6% in the field of retail trade or grain trade is completely unreasonable,” explains the first vice-president of CCF.

• “In a period of high inflation, from the point of view of the administration, there is also a problem of erosion of the tax base (the tax is related to lower turnover last year)”

In his opinion, enterprises are discriminated against, which by their very nature have a production chain scattered among individual companies and fall under the definition of “international”.

“Minimum tax should not be applied to new companies in the first year/s of operation. In general, where it was applied, the measure was limited in time, mainly in order to test the reaction of the business environment,” said Luka.

• “We still don’t know what our government wants to check, which, as we remember, concerns the economy. But if he really wants to get more from the budget, he should review the practices of European administrations.”

• “At this moment, I once again invite all government partners to open a public platform of dialogue, pragmatism, fairness and reason to discuss innovative and effective proposals for improving cooperation for compliance with tax legislation. The sooner, the better.”

“And, to paraphrase a famous saying that is relevant at the moment, in taxation, 1% is inspiration (in choosing the best option for taxation), 99% is dialogue and cooperation for compliance,” concludes Adrian Luca.

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See also: Transnational corporations that will pay 1% tax / How the government will tax you if you make investments