Update: Economic and Social Council, SMEs employers, Fiscal Council – negative opinions on the tax reform

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The Economic and Social Council (CES), which includes trade unions, employers’ associations and civil society representatives, has given a negative opinion on the amendments proposed by the Government regarding the Tax Code.

The vote was overwhelmingly negative, one of the members of the Council, Dumitru Coarnă has told Antena3 TV. Even so, the CES opinion is only consultative.

“The opinion was negative with massive votes from all the three parts. CES has 45 members: 15 from the trade unions, 15 from the employers and 15 from the civil society. Although it is only consultative, this vote counts,” Dumitru Coarnă said.

On the other hand, almost 83% of the entrepreneurs questioned by the National Council for Small and Medium-Sized Private Enterprises in Romania (CNIPMMR) do not have the capacity to raise the minimum wage and 60% of them will lay off people as a result of this measure, Florin Jianu, President of the Council, said.

“This week I sent a questionnaire to which some 400 entrepreneurs responded and the data show that 82.9% of them say they do not have the ability to raise the minimum wage, 60% will lay off people as a result of this measure and over 90% said that their maximum opportunity to raise the minimum wage is RON 100,” Jianu said.

According to him, the transfer of social security and health contributions from employer to employee will upset the business environment, as six million contracts will have to be modified, both in the public and private environments.

“It was said that the contributions will be transferred from the employer to the employee, in fact a percentage remains to be paid by the employer. Some of the salaries will decrease, we have made calculations and for 90% of the SMEs this shift of contributions will mean additional salary costs. So wages will not grow, but on the contrary,” the chairman of the SMEs Council said.

According to him, the Government announces new and new measures, and the business environment does not even have time to analyze the effects of each measure, and the measure is amended.

“Last week, we were preparing an impact analysis for the solidarity fee of 2%. The Government came out and modified it, renamed it, and increased its amount. We really cannot keep up. I do not even know how the new tax is called, but it is certain that it has been increased from 2% to 2.25%,” Jianu said.

In his opinion, every tax measure should be discussed with the business environment at least six months before its enforcement.

Fiscal Council – High risks, inequity, RON 5.2bn losses

According to the Fiscal Council, the impact of tax measures involves losses of about RON 5.2 billion and the assessment of compensations identified by the substantiation note does not reveal full covering.

The Fiscal Council’s opinion was released on Friday and is a negative opinion, due to the fact that it cannot confirm the annual budgetary targets envisaged in the fiscal-budgetary strategy for 2017-2019 will not be exceeded.

The fiscal measures would generate revenues losses to the consolidated state budget in 2018 of RON 5.2 billion (0.6% of GDP). It’s hard to forecast the possible increase of revenues due to the split VAT.

On the other hand, the Fiscal Council says the capping of money transfers to Pension Pillar II to 3.75% of the social security contribution would have a major impact on losses of the calculated revenues.

It also says that the cut in income tax from 16% to 10%, concomitantly with the transfer of social security contributions from employer to employee and the 2.25% to be paid by the employer, are a marginal way to cut the tax burden on labour.

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