BNR’s Isarescu, on the planned turnover tax: It might work for smaller firms, with little added value

The governor of the National Bank of Romania, Mugur Isarescu, suggested that the turnover tax might work only for smaller firms in Romania, as the government laid out plans to fully replace the 16 percent profit tax and enforce the new system for all companies.

“The profit tax works for firms that don’t create added value, which don’t have a lot of production chains. No? It’s in the first tier, down there. It buys something and sells something else. A restaurant, a pub, a small firm. You don’t start to take a lot of products and…What are we doing, are we taxing them all? This was the great revolution of the VAT and the differentiation between the sales tax, as it is called in the United States, and the VAT in Romania,” said Isarescu during an event organized by Ziarul Financiar business daily.

The government led by Mihai Tudose plans to scrap the profit tax and enforce a new tax based on the turnover of firms, with different tax brackets. The measure, which hasn’t been turned into a draft bill yet, was criticized by the private sector.