1204620107 Yi Ssn Pj Bog
Transcript of 1204620107 Yi Ssn Pj Bog
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The effects of 16% flat tax
in Romania
GOVERNMENT OF ROMANIA
NATIONAL COMMISSION OF ECONOMIC FORECASTING
In ternat ional AcademicForum on Flat Tax Rate
Bled, Slov enia, February 3-4,2006
PhD. Ion Ghizdeanu PhD. St. Fanel Videanu
PhD. St. Cristian Stanica Daniela Plavicheanu
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High fiscal burden.
Less transparent tax system.
Progressive tax which did not stimulate work.
High level of hidden economy.
Conclusion: the only viable solution was the introduction
of a flat tax which was meant to bring a fiscal relaxation.
Structu ral, ins t i tut ional and
behaviou ral tens ions in 2004
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The introduction of the flat tax led to:
- simplification and a more efficient
computation system of global income taxation;- reduction of bureaucracy;
- increase of transparency in tax collection;
- the flat tax introduction brought fiscalrelaxation.
Benef i ts o f 16% flat tax
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The expected impact was mainly the change in
economic behaviour of business environment, by:
Increasing the tax base;
Increasing the voluntary compliance in paying
budgetary obligations;
Increasing the arrears recovery.
Expectations before the
flat tax
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income from independent activities;
income from wages and salaries;
income from pensions;
income from agricultural activities;
income from prizes and other sources.
Incom e catego r ies inf luenced
by 16% flat tax
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In the budgetary revenues projection by using SAM-MEGA model, we took into account the behaviour ofeconomic agents:
The partial formalization of employment: growth by415 thousands employees during 20052008;
The increase of collection rate for social securitycontribution by 2%;
The nominal gross average wage will not exceed 60%during 20052008.
Expected resu l ts
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Incentive role of the direct taxation on labour
and capital reduction. The transfer of resources from the budget to the
population and society has a multiplying effect
in economy, by generating superior revenues
from other taxes (social security, VAT).
Pos it ive effects o f f iscal relaxat ion
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The main conclusions emerged from
statistical data analyses
St imulat ing the econom ic grow th The profit tax reduction assured
important financial resources tothe economic agents for
production and investment.
The Gross Domestic Product,excluding non-tax activities(agriculture and householdindustry), which basically werethe most affected by the longand extended floods in 2005,grew by 6.5% in the first 9months 2005.
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GDP grow th
9 months 2004 9 months 2005
- percentage changes vs. the same period of the previous year -
Industry, of which: 6.0 2.0
- Households industry 20.1 -7.9
Agriculture 19.7 -12.6
Construction 9.5 7.1
Services 6.4 7.9
Net taxes 8.9 6.7
Gross Domestic Product (GDP) 8.1 3.6
GDP excluding agriculture 6.6 5.8
GDP excluding agriculture andhouseholds industry
6.0 6.5
Note: In the first 9 months the agriculture, sylviculture, fishing, forestry and hunting represented 11,9%of GDP in 2004, respectively 8,3% in 2005, and households industry 4,4% in 2004 and 3,6% in 2005.
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Technological modernization of economy has
accelerated,with positive impact for the future economic
growth (9 months):
Gross Fixed Capital Formation has increased by 9.4percent.
The import of capital goods increased by 31.2 percent,
as compared to the average increase of imports of 23.7
percent and with the one of consumption goods of 24.7
percent.
Techno logical modernizat ion
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Increasing the degree of voluntary compliance.
The budget revenue from the profit tax was 50 percent
higher than the due profit tax.
The VAT revenues grew by 36.2 percent, fact that
was reflected in the increase of indirect taxes by 25.3percent
Impro vement of the effect ive rates
of taxat ion
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The budgetary revenues
The budgetary revenues were higher
by 17.8 percent than in 2004,
meaning in real terms an increase by
8.1 percent. Due to the increasing number of
both employees and average
earning salary, the revenues of
the main social security funds
(state social security budget,unemployment fund, health
social insurance fund) increased
by 11 percent in 2005.
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Achievements (mil. RON)Nominal
growthReal
growth Weight in total revenues (%)
2004 2005 2005 / 2004 (%) 2004 2005
TOTALREVENUES, 70826.3 83435 17.8 8.1 100.0 100.0of which:
Direct taxes 38152.3 42413.5 11.2 2.0 53.9 50.8
- Profit tax 6483.9 6545.3 0.9 -7.4 9.2 7.8
- Income tax 7122.4 6744.4 -5.3 -13.1 10.1 8.1
- Social security contributions 22457.4 26678.2 18.8 9.0 31.7 32.0
- Other direct taxes 2088.6 2445.6 17.1 7.4 2.9 2.9
Indirect taxes 28525.9 35743.2 25.3 15.0 40.3 42.8
- VAT 16547.2 22535.7 36.2 24.9 23.4 27.0
- Excises 7965.1 9079.4 14.0 4.6 11.2 10.9- Custom duties 1623.3 2040.9 25.7 15.3 2.3 2.4
- Other indirect taxes 2390.3 2087.2 -12.7 -19.9 3.4 2.5
Non-tax 3639 4736.2 30.2 19.4 5.1 5.7
Capital 386.1 400.6 3.8 -4.8 0.5 0.5
Grants 123.0 141.5 15.0 5.5 0.2 0.2
Note:2005 - provisional data
General Conso l idated Budget Revenues
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The effects o f introduc t ion of the f lat tax
rate on employment
The statistical data regardingthe first semester (householdsinquire) show that the increase inemployees number totally
represented a transfer from thehidden economy to the officialone, by 125 thousand persons,respectively.
The operative data at the end ofOctober reveals that theemployees number was higher
by 140 thousand persons, ascompared to December 2004.
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During JanuaryNovember 2005, the increase
of gross average wage was only 2 percent overthe forecasted level.
The share of net average wage in the gross
average wage became 76.4 percent, exactly as
anticipated.
The effects o f f lat tax on average
wage
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Thank you for your attention !