PwC Romania: Romania is EU champion in non-collection of taxes; it loses third of VAT and profit tax

 Romania did not collect about 35% of the estimated profit tax for 2019, the year analyzed by a European Commission report, the non-collection rate being three times higher than the average rate estimated at 10.9% of the 23 EU member states included in the analysis, representatives of consulting company PwC Romania say."Romania is the champion in non-collection of taxes in the EU: it loses a third of both VAT and profit tax. Our country has also been the champion for a decade in non-collection of VAT. Romania is also in first place in non-collection of profit tax," the report cited by PwC Romania reads.The largest gaps were recorded in Romania, Slovakia, Poland and Italy and are mainly caused by tax evasion. The smallest gaps, below 3%, were recorded in Denmark, the Netherlands and Finland.According to the consultants, in Denmark, Finland, Sweden, Austria and France, tax base erosion and profit shifting to other jurisdictions are the main cause affecting national budget revenues."Romania's fiscal and budgetary situation has become critical due to accumulated problems: lack of predictability due to frequent legislative changes, unsustainable public spending and delays in the digitalization of the tax administration. The effects felt by taxpayers are fiscal inequity and difficult-to-finance deficits that attract tax increases. The amounts collected by the budget last year stood at 36 billion lei from profit tax and 121 billion lei from VAT, while the budget deficit was over 152 billion lei. It is certain that better collection would have had a visible impact, in the order of billions for the budget. Therefore, accelerating the use of digital technologies and Artificial Intelligence are important directions to obtain results with an impact on collection. Budgetary problems cannot be solved using only the lever of increasing taxes, which leads to higher costs for the economic environment, reduced investments and, ultimately, weak economic growth. impacting alsobudget revenues", said Ruxandra Tarlescu, tax services coordinating partner at PwC Romania, quoted in the press release.Romania also remains in first place in the European Union in terms of VAT non-collection, having lost about 30% of potential VAT revenues due to taxpayer non-compliance, compared to an average loss of 9.5% for all 27 member states, according to the annual report published by the European Commission. At the same time, the report estimates that the gap represents about 9 billion euros.According to European Commission reports, since 2015, Romania has ranked first, every year, among the member states, with the largest VAT gap."After Romania, the highest VAT gaps were recorded in Malta (24.2%), Poland (16%), Lithuania (15.1%) and Italy (15%). At the opposite pole, Austria reported the smallest VAT collection deficit, of 1%," the press release also informs.