Fiscal Code, which is due for enforcement on January 1, maintains the levels of the main taxes but brings raises, not very significant, in relation to secondary taxes.

The “Bible of the Economy” the Fiscal Code was promulgated last week by President Traian Basescu, its provisions remaining to be enforced as of January 1, 2007.

Approved during the first days of July by the plenum of Chamber of Deputies, the decisional Chamber, the Fiscal Code is unable to impose the extension of the flat single tax of 16 per cent, thought by the Executive as necessary for increasing the proceeds to the state budget. The fiscal provisions due to be enforced next year maintain the level of the flat single tax at 16 per cent, VAT at 19 per cent, in spite of the fact that the recommendations of the European officials were indicating the need to increase one of the main taxes.

In fact, Romania is one of the countries with the lowest revenues to the state budget, and the intention of the Romanian authorities is to increase the incomes to the state budget to over 30 per cent of GDP. The adjustment of the macro-economic imbalances, including by expanding the taxable base, is a sin-qua – non requirement for Romania, considering that at the time of accession, our budgetary deficit is 2.5 per cent of GDP. The limit of the budgetary deficit required by the EU standards is 3 per cent of GDP.

The alternative proposed by the Executive provided that the tax for the capital market is 16 per cent regardless the time during which they may be held. In spite of the fact that initially was among the most disputed measures of the Fiscal Code, the taxing system for certain categories of micro-enterprises shows relaxation. If the Senate proposed charging 1.5 per cent on the turnover, the Deputies voted that micro-enterprises would pay, as of January 1, 2007, 2 per cent tax on their turnover, and this will be raised to 2.5 per cent in 2008 and 3 per cent in 2009, on condition they are not active in management or consulting business. Currently, micro-enterprises may choose between having their turnover taxed by 3 per cent or their profit by 16 per cent. The Deputies maintained the provision according to which small businesses will pay a tax of 16 per cent on the profit if their turnover is in excess of EUR 100,000 during the year.

State Secretary in Ministry of European Integration, Leonard Orban, appreciated that the provision of the new Fiscal Code addressing second hand cars could be regarded as a breach of the EU treaty, which would mean “tough” financial sanctions into the court.

Postponing revenue taxation for agricultural activities has been unanimously agreed by lawmakers, so that the 2 per cent tax starts to apply as of 2008.

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