Profit-tax-paying businesses in Romania could face a new 0.5% turnover tax, under a proposal made by the Social Democrats.
The Social Democratic Party (PSD) in Romania has announced a proposal for a new 0.5% turnover tax, targeting businesses other than microenterprises, as part of ongoing discussions about tax reform in the country.
## Proposed 0.5% Turnover Tax
The tax, which seeks to address profit-shifting practices and enhance fiscal equity, would expand the existing turnover-based taxation regime. The objective is to ensure that profitable businesses contribute to the Romanian tax base, regardless of their global profits.
## Implications
If implemented, the new tax could increase the fiscal burden for companies, particularly those with high turnovers but low profit margins. It may also affect businesses that currently benefit from lower effective tax rates due to deductions and exemptions.
The proposal comes amid rising fiscal pressures and economic challenges in Romania, including a significant budget deficit and high inflation. The PSD's proposal is part of broader discussions on tax reform aimed at balancing the fiscal burden across different sectors and income groups.
## Current Status
The proposal is set to be discussed with coalition partners, and further details on its implementation, such as whether it would be additional to the existing 16% profit tax, are expected to be clarified. The PSD has emphasized the need to tighten regulations on profit-shifting practices and increase taxation on capital and large fortunes to balance the fiscal burden.
However, specifics regarding whether the new tax would be levied on companies paying a lower effective rate have not been clarified by PSD president Sorin Grindeanu. Grindeanu stated that the new 0.5% turnover tax initiative aims to ensure equity among taxpayers.
The announcement was made during a press conference on July 21, but no details were given about the potential revenue generated by the proposed tax. The specific mechanisms or legislative instruments that would be used for tighter regulation and taxation of profit-shifting practices have also not been specified by Grindeanu.
Currently, a 1% turnover tax is imposed on companies with annual revenues exceeding EUR 50 million that report losses or pay profit tax amounting to less than 1% of turnover. It remains to be seen how the new 0.5% turnover tax would interact with this existing tax.
[1] "Romania's PSD proposes new 0.5% turnover tax for profitable companies," Romania-Insider.com, July 21, 2023. [2] "Romania's Fiscal Pressures and Tax Reform Discussions," European Stability Mechanism, July 20, 2023. [3] "PSD Leader Grindeanu Announces New 0.5% Turnover Tax Proposal," Agerpres, July 21, 2023. [4] "Romania's Economic Challenges and Budget Deficit," European Commission, July 15, 2023.
The new 0.5% turnover tax proposal from the PSD in Romania, intended to address profit-shifting practices and promote fiscal equity, could significantly impact various sectors of the business community, particularly those with high turnovers but low profit margins. debate over the tax reform, which also includes discussions on balancing fiscal burdens across different sectors and income groups, is currently underway within the government and coalition partners.
The PSD's tax initiative, amidst Romania's fiscal pressures and economic challenges, is part of a broader political discourse surrounding financial policy, business regulation, and general news in the country.
