Govt cancels minimum tax from September but keeps flat tax

The minimum tax will be canceled this fall while the flat tax will be kept, according to Romanian Prime Minister Emil Boc. Progressive taxation will fail to raise more money to the state budget compared to the current revenues. “The 16 percent flat tax will be kept. I sincerely tell you the progressive taxation won't yield the revenues some people expect. We had progressive tax in Romania before the and the weight of state revenues was still of 30 – 31 percent of the GDP. In 2005, when the flat tax was introduced, revenues have actually increased,” said Emil Boc. Economy Minister Adriean Videanu has expressed his support for the measure. “The progressive tax brings no economical gains, at some point it could have a social protection feature but that's all,” he said. The minimum tax, which was introduced in spring last year, is between RON 2,200 (almost EUR 500) for companies with revenues up to RON 52,000, and of RON 43,000 (around EUR 10,000) for companies with revenues above RON 129 million. Companies which post profit pay a 16 percent tax, but not less than the minimum amount. The Government was planning to replace the minimum tax by a forfeit tax this year, but delayed the measure.