loader

Romania is among the top tax reformers in the CEE in the Paying Taxes 2013 report

Romania has improved in the ranking of the Paying Taxes 2013 report from the World Bank, IFC and PwC. The introduction of the single declaration for social contributions and the mandatory filling of tax declarations by large and medium sized enterprises have pushed up Romania 18 positions in the Paying Taxes 2013 index, the third biggest improvement reported by a country from CEE last year, after Slovakia and Slovenia, while most of the other CEE countries actually reported a downgrading in the global rankings last year.

The introduction of the possibility of online tax payments will further improve Romania’s position in the Paying Taxes index.


The Paying Taxes 2013 study looks at tax regimes in 185 economies and measures the ease of paying taxes by taking into account a case study medium sized enterprise, with the same activity, same number of employees and same turnover in all countries measured. The report looks at three main indicators: the total tax rate, meaning the amount of all taxes levied on a company as percentage of its profits, the time to comply, the number of hours needed for a medium-sized company to comply with the tax regulations imposed in its country, and the number of payments the company needs to undertake yearly in order to comply with the fiscal legislation.


“We have seen Romania making notable progress in the past year in terms of easing the paying taxes process. The introduction of online mechanisms has slashed the number of payments that an average enterprise needs to perform from 113 to 41. Take for example labour related payments. From 84 it has been reduced to only 12 yearly, after the introduction of the single tax return for social contributions. Also, the time to comply was also slightly reduced from 222 hours annually to 216 hours”, stated Peter de Ruiter, Tax and Legal Services Leader, PwC Romania.


At current ratings, Romania stands slightly below the CEE average in terms of Total tax rate (44.2% as opposed to the CEE average of 44.6%), significantly better than average in terms of time to comply (216 hours as opposed to the CEE average of 263 hours), while the number of payments is still well above the CEE average (41 payments compared to an average of 15).


“We believe that as e-filling and online tax payments become standard procedure for Romanian companies, the time to comply will decrease even more substantially. There is also room to slash the number of payments even further, by scrapping payments other than those required for corporate income tax and labour taxes.  In terms of reducing the total tax rate, we see potential for reducing social contributions as these have the largest impact on the company’s tax position. This easing of labour taxation could boost job creation and, as we all know, the paradox of taxation is that sometimes lower tax rates lead actually to an increase in tax revenues provided collection improves and tax evasion is narrowed down”, added de Ruiter.

 


Paying Taxes 2013measures all mandatory taxes and contributions that a medium-sized firm must pay in a given year. Taxes and contributions measured include the profit or corporate income tax, social contributions and labour taxes paid by the employer, property taxes, property transfer taxes, dividend tax, capital gains tax, financial transactions tax, waste collection taxes, vehicle and road taxes, and other small taxes or fees.


The report finds out that, globally, a medium company pays on average a Total Tax Rate of 44.7 percent of profits, making 27.2 payments, and spending 267 hours to comply with its tax requirements.


An economic analysis undertaken by PwC  shows that reducing complexity in tax administration – both in terms of the number of payments and the time taken to deal with tax matters – was correlated with improved tax collection and higher  economic growth.


About the World Bank Group
The World Bank Group is one of the world’s largest sources of funding and knowledge for developing countries. It comprises five closely associated institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a distinct role in the mission to fight poverty and improve living standards for people in the developing world. For more information, please visit www.worldbank.org, www.miga.org, and www.ifc.org.


For more information on the Doing Business report series: www.doingbusiness.org


About PwC


PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/ro


PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.


For more information about the Paying Taxes study, visitwww.pwc.com/payingtaxes.