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PwC Romania Analysis : priority for the government is the creation of an efficient fiscal system

The leaders of companies consider that the priority for the government is the creation of an efficient fiscal system, this priority surpassing even the requirement to improve the infrastructure, which for many years has been at the top of expectations the business environment had from the authorities, according to an analysis PwC Romania.

‘In our survey, the leaders of companies said that priority one for the government is the creation of an efficient fiscal system. This priority surpassed even the requirement to improve the infrastructure, requirement which for many years has been at the top of expectations which the business environment had from the authorities. Through the national plan for recovery and resilience, the government said that they will eliminate the gaps and distortions in the fiscal code to identify areas which will get more budgetary income’ said in an article Daniel Anghel, partner and leader of the Department for Fiscal and Legal Consultancy, PwC Romania.

According to him, the fiscal consolidation would mean the increase of the budgetary collections due to a taxation system which covers more taxpayers than before, and implicitly, more equity among them.

In these conditions, the PwC representative says that’ the exceptions which were given before the pandemics, either it was about the profit tax, income tax, social contributions or VAT affected the budget collections without creating an efficient fiscal system which the business environment considers a priority’.

‘As  a conclusion, we see that the business environment reached a certain degree of maturity and sees that, without an efficient fiscal system which includes both fiscal legislation and the budget, there will be no real economic growth. Such an approach places a positive pressure on the government which will have to take concrete measures in the fiscal –budgetary area next year, once the pandemics are over, and the temporary measures for fiscal relaxation accepted by the European Commission will be eliminated gradually’ Anghel said.

Thus, the leaders of companies reached the point to place the fiscal system at the top of priorities for the government.

‘The perception of the business environment has been positive since the first months of the year when our PwC survey noticed that the optimism of the leaders of companies reached a record level of the last decade. But they also expressed a series of worries. The main worry is that the increase of public debt – including due to the support measures taken in the pandemics – could draw changes in the fiscal policy’ the analysis says.

According to it, the business environment does not exclude the increase of taxes, even if there were many confirmations there is no such intention.

‘The number of those who predict fiscal changes (77%) is higher than the number of those who believe that the economy will have a good evolution (60%) and the reason mentioned by the managers of the companies – the increase of the public debt – is justified as long as its increase was very fast over the last two years, going from 35% of GDP to 50% in July 2021’ the article says.

According to the quoted document ‘ the state borrowed much over the last period’ both to support the economy in the context of the sanitary crisis, but mostly to finance the current expenses and the investments included in the budgetary law.

‘ In fact, the need for financing for support measures (postponement of tax payment, temporary fiscal facilities, etc.) was not very great in Romania, only  around two or three percentage points from GDP, as the IMF data say, which place Romania the last in the EU at this chapter. In the EU, the government allocated significant percentage points from the GDP to support the economies, situation which was reflected in an abrupt growth of deficits. So it happened that the public aggregated deficit at the level of the EU increased to approximately 7% of the GDP last year’ the material says.

According to the PwC representative, with the economic recovery and the gradual elimination of measures imposed by the sanitary crisis, the deficits will be diminished in the member states, with the perspective that the average in the Union to drop next year towards 4% of GDP.Implicitly, in this context,the public debt in the GDP at the level of the EU will reach another peak in 2021.

The most recent European report ‘ Taxation trends in EU 2021’ shows that Romania collects 26% of GDP from taxes and social contributions, being last but one in the EU, where the average is almost 40% of GDP. He considers that, now, the government target is to drop the deficit to 2.9% of GDP until 2024.