Romania: Optimising tax collection – a digital approach

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Romania: Optimising tax collection – a digital approach

Sponsored by

eygreece.png
Romanian tax authorities have started to use digitalisation for the purpose of tax collection enhancement

Andra Caşu of EY Romania discusses the tax authority approach to using digitalisation for the purpose of tax collection enhancement in Romania.

'Digitalisation’ was the most frequently used word by the Romanian tax authorities during the last year. Based on the Recovery and Resilience Plan, the Ministry of Finance allocated almost €300 million ($356 million) for the purpose of digitalising the National Agency for Tax Administration. 

This is because the digitalisation and enhancement of tax compliance could be the solution to help tax authorities to obtain efficient results. At least this seems to be the conclusion, looking at the tax collection level driven by the recent tax amnesty and payment bonification measures.

This conclusion is also reflected by the actual figures – a study conducted by EY Romania shows a historical minimum of 8% as the difference between the taxes declared and paid during 2019 (a year in which tax amnesty measures were taken in Romania). However, what more may be done to enhance tax collection, apart from a tax amnesty and payment bonifications? 

Behavioural insights

The proactive attitude of taxpayers is an important instrument helping the tax administration in the entire world, when it comes to tax declaration and payment. This is particularly relevant in countries that have a system based on which tax statements are filled in directly by the taxpayers (as it is currently in Romania). On the other hand, there are no clear measures that can ensure the tax authorities obtain excellent results when it comes to timeliness and proactiveness in tax compliance. In other words, that taxpayers will voluntarily comply with the tax regulations.

As indicated by the OECD, in order to encourage compliance, the tax authorities may use certain instruments which bring efficient results in the respect of increasing tax collection (as already proven in practice in some countries). 

The OECD has issued comments regarding taxpayers’ education, as well as adequate communication of tax measures and efficient services for taxpayers, all of these being supported by an accurate knowledge of taxpayers’ behaviour and decision-making reasons. Thus, the OECD has brought to the public’s attention the term of ‘behavioural insights’. It is most likely a new beginning that needs to be addressed in Romania as well, regarding the taxpayers’ profile and psychology.

In order to increase tax compliance, the Romanian tax authorities may use new types of interaction, based on a behavioural approach (‘compliance by cooperation’).  The local authorities need to consider the Latin spirit of the population, who are typically open to a warmer communication style, which will show that tax authorities do care for them as taxpayers. 

In this respect, it will be necessary to identify and use the most efficient behavioural items for Romania, via using specific marketing or psychological studies as initial basis, from which to extract the relevant information and then adapt it from a tax perspective. 

Moreover, it is relevant to look at this from a quantitative versus qualitative point of view (i.e. whether to consider only the most relevant behavioural items, or as many and diverse items as possible). In order to answer these questions, the psychological analysis of the Romanian taxpayer profile will be the most relevant starting point.

Additionally, creating a digital taxpayer and identifying easier tax payment methods (from any payment device) represent likewise best practice examples. In order to ensure that tax payments are efficiently done, tax authorities should offer certain electronic payment methods to the taxpayers. For instance, in certain member states it is possible to pay taxes via a smartphone application. 

In case of any reimbursement, the tax authorities should deal with this as fast as possible, so that the taxpayers do not have any cash-flow issues. A constant discipline of the tax authorities will be reflected going forward in the taxpayers’ discipline, who will gradually understand that cashing in taxes and budgetary reimbursements are a perpetuum mobile, with a bilateral interest.

In Romania, the most recent public statements of the NAFA President refers to the digitalisation of the institution and to the improvement of tax administration services.

Among these, the implementation of the SAF-T project (which has already started) sets the initial step on a road which leads to the enhancement of tax collection in Romania. SAF-T, along with e-invoicing and connecting cash registers will offer to the Romanian State real time data and will contribute to reducing tax evasion and increasing the tax collection.

Looking ahead

The Romanian tax authorities have started to use digitalisation for the purpose of tax collection enhancement. Also, the behavioural component, along with taxpayers’ educational aspects needs to be well framed. Romanian taxpayers need to clearly understand their ‘to dos’, when and how they can pay taxes and by what means these tasks can be completed as easy as possible. 

As well as this, pushing all the right legislative buttons (including tax incentives, bonifications, a more modern and simplified legislation for facilitating tax declaration and payment) will lead to an optimised tax collection in Romania.

Andra Caşu

Partner, EY Romania

E: andra.casu@ro.ey.com

 

more across site & bottom lb ros

More from across our site

ITR’s most interesting stories of the year covered ‘landmark’ legal battles, pillar two, AI’s relationship with transfer pricing and more
Chinwe Odimba-Chapman was announced as Michael Bates’ successor; in other news, a report has found a high level of BEPS compliance among OECD jurisdictions
The tool, which will automatically compute amount B returns, requires “only minimal data inputs”, according to the OECD
The rules are intended to implement the substance of an earlier OECD report in its entirety
While new technology won’t replace the human touch, it could help relieve companies’ staffing issues, EY’s David Helmer and Daren Campbell tell ITR
The firm said the financial growth came from increased demand for its AI services and global tax reform advice
Chrystia Freeland had also been the figurehead of Canada’s controversial digital services tax adoption, which stoked economic tensions with the US
Panama has no official position on pillar two so far and a move to implement in Costa Rica will face rejection, experts tell ITR
The KPMG partner tells ITR about Sri Lanka’s complex and evolving tax landscape, setting legal precedents through client work, and his vision for the future of tax
Overall turnover at the firm also reached a record £8 billion; in other news, Ashurst and Dentons announced senior tax partner hires
Gift this article