2024-02-11 16:31:00
PSD has hinted, in recent years, that we would be the only country that still has a progressive tax in the EU. This is false. There are countries with a single rate, but also countries with a dual rate (which is not a progressive tax). The progressive one should have a system of deductions, collect all the income and pay the tax according to those quotas.
Wallet with moneyPhoto: GRAZVYDAS J / Panthermedia / Profimedia
“Many politicians say that we remain the only country with a single quota, and it is not true. We have competitors. Hungary has 15%, the Czech Republic and Poland do not have a progressive quota, but two quotas: it is neither unique, but neither progressive. The Czech Republic has 15% on up to 60,000 euros per year and 23% on more than 60,000 euros per year. Poland has 12% and 32%: at the income ceiling of 23,000 euros per year. Bulgaria has a unique quota of 10%,” said Angela Roșca, managing partner of Taxhouse-Taxand Romania, at the TaxEU Forum.
Let’s not forget that we have 10% following the contributions have been moved from employers to employees. Basically, we still pay the same amount to the state (as a share), only the percentage of contributions has moved.
The recommendation to introduce the progressive quota in Romania, on the recommendation of the Government of the Bahamas / IMF thanks Liviu Voinea
“Why in the study published in 2022 by the IMF (regarding progressive taxation no), they thank Mr. Liviu Voinea? I thank him for the order, for ordering the study. It says that the study was done at the request of the Romanian Government. Only in the preamble, that there is a charm to copy/paste from the report formats, they forgot to delete the Bahamas and put Romania. In the study published by the IMF, it says that the recommendation of a progressive quota in Romania was made at the request of the Government of the Bahamas (the IMF later corrected its report no)”, said lawyer Gabriel Biriș, former secretary of state in the Ministry of Finance.
According to him, when you look at these studies, you are a little shocked.
“These studies have no expert. Did they come to the Chamber of Tax Consultants to be part of the team? Not! There is no expert in Romanian tax legislation. No one who knows what’s going on in the grass. We relate to these as if they were light”, Biris also stated.
Did progressive quotas bring more money to the budget? Not!
“We had progressive quotas. Did they bring more money to the budget? I looked to see how much money the income tax brought in the last 23 years to the budget. In the first 5 years there were progressive quotas between 18 and 40%, per work. Real estate speculation was taxed at ZERO, gains from the sale of shares at 1% and dividends at 5%. In the first 5 years, we had an average of regarding 2.8% of GDP income. The single rate of tax was introduced on salary, not on income. In the program they wrote income tax and did it on salary because one was a minister and had investments in the stock market and had to stay 1%, others had real estate speculation and did not want to pay taxes and they decreased. In 2007, the share of income settled at 3.3% of GDP and stayed at an average of 3.35% for 10 years”, said the lawyer.
According to him, if we look at that level of 3.35% and compare it to the 2.25% we had on progressive rates, it’s more.
“Why would the IMF, the World Bank and the political decision-maker in Romania now say that we have to go back to a system that didn’t work and cost much more? Probably, the introduction of progressive quotas will bring somewhere 4-5 million additional declarations that also need to be processed”, said Biriș.
Isn’t it better to fix something that worked than to introduce something that didn’t work?, he wonders.
“How do experts from the IMF and the World Bank justify the recommendations to return to progressive rates? Did they look at the historical data? I am convinced that no, that I did not see them there. If they were looking, we saw them,” said the tax expert.
The IMF scenario regarding the progressive tax in Romania
The IMF talks in a report regarding introducing a 20% rate for the top decile of the income distribution (while maintaining the 10% rate up to the top deciles). According to the international institution, this would leave most taxpayers unaffected. Based on this reform scenario, approximately 5.6 million taxpayers would not pay higher taxes, but only 650,000 Romanians. It would bring additional revenue of 1% of GDP.
It also recommends the introduction of tax credits for people with incomes in the bottom decile of the income distribution. The aim is to encourage participation in the labor market.
Assuming a household earns 10,610 lei annually, it would receive an additional reimbursement of 4,031 lei, or 38% of its gross income. This reform scenario would have no impact on the average tax rate for the 10th and 90th deciles, and it falls for the bottom decile, while it rises for the top.
In Romania, we have many employees who appear as having the minimum wage due to the micro-enterprise regime. IMF data suggests that around 1 million such paid employment contracts are in micro-enterprises. That is why the IMF says that a reform of micro-enterprises is needed before coming up with such measures.
A tax credit system done well will encourage labor supply and to support progressivity can have a lower budgetary cost of revenue.
Apart from the 10/20% scenario, the IMF says that 16%/20% or 16%/25% scenarios can also be made.
What scenarios did the World Bank make when it comes to the introduction of a progressive tax in Romania
The World Bank, in a report in the summer, came up with some ideas regarding the introduction of the progressive tax.
- Scenario 1: keep the current rates, remove personal income tax exemptions and increase the level of the basic allowance (personal deductions). Tax neutral impact as the increase in the deduction is offset by the elimination of exemptions.
- Scenario 2: Increase income tax from 10% to 13% and introduce a refundable tax credit for low wage income.
- Scenario 3: the elimination of the CAS deductibility, the introduction of three progressive rates for the income tax of natural persons from work (6% for incomes up to 80,000 RON/year; 12% for incomes between 80,001 RON/year and 189,000 RON/year; 18% for incomes over 189,000 RON/year) and the introduction of a refundable tax credit for reduced salary incomes.
- Scenario 4: the elimination of CASS, the elimination of CAS deductibility and the introduction of three progressive rates for the income tax of natural persons from work (10% for incomes up to 42,000 RON/year; 20% for incomes between 42,001 RON/year and 100,000 RON/ year; 25% for incomes over 100,000 RON/year).
1707673907
#lie #thrown #PSD #European #country #single #quota #Biriș #IMF #Liviu #Voinea #study #progressive #tax
