The International Monetary Fund (IMF) is not giving up the project it submitted to the Romanian authorities last year, which entails "gathering" all four social security contributions (social insurance, unemployment, healthcare and accidents) into a single tax.
All this considering Finance minister Mihai Tanasescu failed to persuade the IMF that Romania needs a flat income tax quota, with the institution's experts feeling that project was not a real priority.
The IMF did not oppose Tanasescu's plan but said that, as long as the state budget could not afford anything less than 23%, introducing the flat tax would be pointless. Why is that? Because this level would be too high to support the plans to bring out in the open a significant percentage of the economy the Finance Ministry is unable to reach. Second, the simplification and reduction of the fiscal administration costs, used as arguments, were not considered extensive enough to justify the measure, particularly because the complicated deduction system that should have compensated the losses of those paying 18% income tax at the moment would still have required management efforts from the Exchequer.
Theoretically, the IMF is not against the flat income tax, particularly because it is now carrying out assistance programmes with six countries that gave up the progressive income taxation this way.
The Fund, however, feels the Romanian fiscal system's real priority has to be continuing to cut the social security contributions, which directly impact on the work force costs, on the competitiveness and on the salary level. The total contribution level is set to go down by three percent as of January 1, 2004 and reach 49.5%.
Mihai Tanasescu said two weeks ago that the project to put social security contributions under the same umbrella was no longer topical, because it was hard to find some common ground to levy the five taxes.
The IMF will soon dispatch a team of experts to Bucharest, to assist Tanasescu's people in finding the common taxation base.
As far as the Fund is concerned, the administrative incapability to collect social security contributions can only be alleviated by putting all the contributions together into a single tax and reducing the accounting workload to which economic operators are subjected. It would also reduce the very high number of taxes the taxpayers have to bear.
The authorities embraced only part of the ideas discussed with the IMF in the second half last year, by establishing an agency specialised in contribution collection and management and transferring the Labour Ministry's duties in this regard to the Finance Ministry therefore.
The Finance minister says the agency is ready to begin operations early next year, as the new procedures to file salary returns and pay the contributions have been completed. razvan.voican@zf.ro
Pentru alte știri, analize, articole și informații din business în timp real urmărește Ziarul Financiar pe WhatsApp Channels
