Romanian fiscal amnesty – the good and the bad

The Romanian Government has just green-lighted the controversial project of fiscal amnesty, as it is called, or the financial restructuring of the public and private debts, as the Government named it. Is it a good measure or not?

First of all, let’s say it is not a pure fiscal amnesty, but more a financial restructuring of the debts. Why? The Romanian Government offered restructuring of the payments to the companies who owe to the Romanian budget more than 1 million Euros, meaning main debt plus penalties and interest. These companies will benefit from the restructuring of the payments, based on a schedule set up along with the Romanian Financial Agency.

Second of all, even for the persons and companies with less than 1 million Euros in debt, it’s not about a financial amnesty, but only about the “amnesty” of the penalties and accessories payments. So, every person or company with less than 1 Mil. Euros unpaid taxes will have the possibility to pay, up to 30 November, only the main debt and to be exempted from paying the penalties and accessories.

Is it a good financial and fiscal measure? The right-wing Opposition says it is not, but it’s normal for them to criticize each measure taken by the left-wing Government. In fact, the fiscal amnesty bill is to write-off only part of the companies debt to the state and only under certain conditions, and, in our opinion, this is not else but a good measure on a short and medium term.

On a short term, there is a win-win situation, both for the state and for the companies or citizens: Romanian state will collect more than 500 Mil. Euros this year due to this tax amnesty bill from which will benefit 28 500 private companies and 23 000 citizens, plus other state institutions.

On a medium and even long term, the same Romanian state will benefit from more taxes from the very companies and citizens who were exempted from the fiscal penalties.

Now, imagine a company which owes to the Romanian state 1 Mil. Euros. This company has its bank accounts garnished by the Romanian state and it cannot economically survive in such conditions. More often, such a company will cease its activity in less than a year and the Romanian state will stop collecting taxes anyway. If helped with the fiscal restructuring and with the amnesty of the penalties and accessories to the main debt, such a company will revive its activity and will continue paying taxes after paying its main debt to the Romanian state.

We think this is a good measure on a short and medium term. On a long term, it is possible for some citizens and companies to wait for the next fiscal amnesty and not to pay taxes any longer, hoping this kind of measures to be periodically taken by the Romanian Government.

Anyway, in this case, the state has the fiscal means to tackle this kind of behavior from citizens or companies.

The conclusion? Our opinion is that Romanian fiscal amnesty or the fiscal restructuring of the debts is a very good measure to be taken in a period when the Government tries to limit its spending and to collect more taxes in order to limit its budgetary deficit.