Foreign investors ask Romania’s Govt. for higher penalties for tax evasion

The Foreign Investors Council (FIC), an association of the leading investors in Romania, has asked the Government to increase penalties against companies that do not pay their taxes and to work on bringing down the subterranean economy, rather than aggressively targeting honest taxpayers.

“Penalties for tax evasion should be increased and a list of taxpayers with arrears should be made public. Reform of ANAF (Romania-s tax authority – e.n.) should continue, to eliminate the practical deficiencies in fiscal administration, as well as creating an integrated public IT system connecting different authorities (such as fiscal, health, local administration, legal, and the land registry),” is the recommendation that FIC made to the Government in the tenth edition of its White Book, launched on Tuesday, May 26.

Tax evasion creates unfair competition, putting those who comply with the law at a disadvantage, according to FIC representatives. “FIC welcomes and supports the Ministry Finance and the National Agency for Fiscal Administration’s (ANAF) in their ongoing work to tackle tax evasion and tax fraud. However, tax audits are not always focused in the right way to enhance revenue collection for the state budget,” according to the same document.

FIC pointed out that “since the fiscal authorities often focus aggressively on companies which are actually paying the correct taxes, and which are large contributors to the budget, there is a major risk of a significant deterioration in the image of Romania in international business, the media, and diplomatic circles, including with the European authorities”. This could lead to lower new foreign direct investments and could determine existing investors to reduce their presence and investment plans in Romania.

The FIC also considers that improving transparency should represent a top priority for the authorities, especially when it comes to tax changes.

“There have been some good examples of improved communication with the business community. However, there is still a continuing problem of legislation being passed quickly, often at very short notice, and with little time for the business community to have effective input. Furthermore, tax inspectors’ interpretation of legislation changes frequently and new interpretations are also applied to the past. This means that in practice, the rules can change unpredictably and dramatically,” FIC said.

The White Book, which is published every two years, is a thorough analysis of the Romanian economy in which FIC members aim to identify the progress recorded since the last edition and make recommendations for further improving the business environment in the medium and long term.

“The White Book is the result of the concerted work of all our members and it contains a large array of recommendations regarding infrastructure, energy, taxation, agriculture or healthcare, to name just a few,” said Mihai Bogza, FIC President.

FIC members account for roughly two thirds of the foreign direct investment in Romania.