The short answer is: the structure of the Romanian fiscal system and the structure of the fiscal code itself. Both structures are unnecessarily complicated and, as a direct consequence, unstable.
Last week I witnessed kind of a unique event in the history of the Romanian legislative body: no less than 38 bills that were amending the fiscal code have been rejected in one session by the Budget, Finance And Banking Commission of the Chamber of Deputies,
No, the amendments were not targeting the recently rewritten fiscal code. Nor did they mean a change in the Romanian legislators` strategy. It was a simple cleanup of the pipeline of projects that, had the new fiscal code not come into law, would have sooner or later found their place on the long list of laws which had modified or added to the Romanian fiscal code, from 2004 until now.
Which I believe is the perfect opportunity to explore the reasons why the nightmare of modifications galore has not ended. Why is it that we will continue to witness wave after wave of amendments to the fiscal code in the coming years.
36 Too Many Taxes And Contributions
In its current form, the fiscal code covers no less than 42 (fourty two) taxes, levies and contributions. At one end stand taxes that have a universal character, like the VAT. But at the lower end, believe it or not, we find the tax on getting divorced through a non-judicial procedure, or the tax for obtaining a heliographic copy (not even google could help me understand what this is, or as John Oliver would say: “How is this still a thing?”) of cadastral plans.
Now, one does not have to be a genius to realize that by amassing such a large number of species under the same hood, you are begging for trouble, which in the case of a legal norm means a permanent source of instability.
Things would be completely different if the structure of the entire fiscal system would be based on 6 taxes:
1 tax on businesses (either on profits or on revenues)
1 income tax for natural persons
1 tax on properties
1 tax on added value
1 (well, not really, but for the sake of argument) excise tax
1 social tax
In principle, there is absolutely no logical reason whatsoever to have more than these six.
The first in line to be eliminated from the fiscal system, and from the fiscal code for that matter, are the so-called local taxes. Most of these taxes are monetary compensations for a wide range of services provided by the local authorities, from issuing building permits to the above mentioned heliographic copies. But since other similar services provided by the state are not included in the fiscal system (say the judicial stamp or the tax for issuing a passport), nor should these local taxes be. Similarly to the judicial stamp tax, some should be regulated through special laws. Others, like the tax for issuing a street address certificate (which costs 2 euro !!!!) should be included in lower level legal norms. But none of these taxes have anything to do with the fiscal system and all of them should be eliminated from the fiscal code in an instant.
An Unwieldy And Unnecessarily Complicated Social Contributions System
As for the social contributions (which is an euphemism, they are taxes indeed) there is no need for six of them. Why is it necessary to have the contribution for unemployment insurance distinct from the contribution for professional accidents ? Each of them with its customized set of rules and filings and terms and so on. Only the provisions that are covering directly these contributions are taking 86 articles on 58, but there are many others scattered all over the code. One social tax is enough, the rest is sixth grade level money allocation, how much and when are going where.
The Mixup Of Fiscal Policies, Procedures, Exemptions, Sectorial Fiscal Regimes And Tax Incentives That The Fiscal Code Is Made Of
This is a no brainer, really. People realized it though, only after President Iohannis has returned the code to the Parliament based only on fiscal policy reasons. He did not even bother to mention (why should he have done it?) a single article to be modified. Which, funny enough, left the Senate confused and not knowing what to do for a couple of days, until people realized that the whole code was under scrutiny. This is what happens when in the same act one finds both fiscal policy provisions and procedural provisions. You put the whole text at risk!
All the fiscal policy issues like the level of taxation, exemptions, special fiscal regimes meant to encourage or discourage various economic sectors, fiscal incentives, all these should be taken out from the fiscal code. They should be subject of special laws.
Some would argue that this was situation before the fiscal code when we had hundreds of fiscal laws. This is completely false!
What I am advocating for is one fiscal code to cover all the taxes from a procedural point of view and to cover the general rules only (not the exceptions from the general rules), sided by several special laws covering the level of each of the taxes and the exceptions from the general rules that derive from the fiscal policy of the ruling political entity.
In short, the fiscal code did not need to be re-written at all. What the fiscal code needed (and still needs) badly is to be re-formed.
Photo: ”Mineral Tensions, acrylic on canvas, 170 H x 200 W cm” courtesy of Mirela IORDACHE @ mirelaiordache.com