The priority for the Foreign Investors Council, fiscal stability
Part of FIC's role is to analyse the most difficult aspects of the current economic climate, with the aim both of overcoming the financial crisis and also of taking the necessary measures for better interaction with decision makers. In the current economic and political context, the stability of fiscal policy should be the Romanian authorities' main priority in order to maintain a positive climate and to support a strong business environment.
"There are still significant challenges with regard to the economic situation, with difficulties caused by the effects of the international economic crisis as well as the structural aspects related to maintaining the competiveness of Romanian economy. Once more the administration must prove its capacity to establish a medium term strategy for its priorities and particularly to find, as soon as possible, the necessary levers to relaunch the economy. " underlined Shachar Shaine, the FIC President.
In particular, the government needs to improve significantly the takeup rate of EU funds. These provide a historic opportunity for Romanian to modernize its poor infrastructure. This will encourage more investment in the long term, and mitigate the effects of the current downturn because these infrastructure projects will create jobs and boost the economy. "
As Serban Toader, FIC Board member and Chairperson for taxation points out :"The necessary elements for such a policy are: (a) preparing a coherent, medium and long term fiscal strategy containing measures to relaunch the economy having as its purpose both an increase in income for the state budget, as well as support for the business environment; and (b) better transparency of decision making linked with maintaining and improving the partnership between the authorities and taxpayers in particular by a permanent and effective dialogue with the private sector."
Introducing the 16% flat tax rate was a very important step in attracting investment and one of the main reasons for its implementation was the belief that it would increase the tax base by including a high percentage of income from the underground economy. It is indisputable that introducing the flat tax led to an increase in income for the state budget and it also legalized many transactions which were previously part of the underground economy, consequently leading to an improvement of the Romanian fiscal environment.
Maintaining fiscal stability should be a firm objective of the authorities in order to ensure a stable legislative environment in the current economic context, and this is the key condition for Romania to attract new investment.
FIC appreciates the Ministry of Finances' efforts to improve the consultative process with the business environment and considers that this will have positive results for the business community and for the state authorities. Consequently, FIC recommends that this process should continue and be developed so that a continuous dialogue may take place in order to create quality legislation which serves both the investors' and the state authorities' interests. Moreover, this consultative process should be extended to include other state authorities having responsibilities in the field.
Decisional transparency and improvement of the partnership between the taxpayers and the authorities may be achieved by applying to a greater extent the provisions of the law regarding decisional transparency, i.e. by organizing regular and effective consultations with the business community, about legislative proposals and initiatives and asking the business community to come forward with their own legislative proposals and initiatives.
Regular and effective consultations between taxpayers and the authorities, based on the partnership principle are also necessary to encourage and protect the business environment, particularly taxpayers which comply with their obligations. On the other hand the authorities should tighten sanctions for nonpayment and evasion.
The Foreign Investors Council (FIC) is an association of the leading foreign investors in Romania. The FIC was established in 1997 when it officially started its activity with 26 companies as members. Today FIC accounts about 110 companies whose cumulated investments in Romania represent approximately two thirds of the total foreign direct investments made since 1990. FIC includes multinational companies providing the Romanian economy with a variety of goods and services.
The member companies of the FIC believe that the dialogue between policy makers and the investors lies at the very heart of successfully improving the climate for investment while stimulating the development of the Romanian economy.
The FIC is well positioned to provide constructive input to policy makers given the breadth of its membership, both in terms of their international experience and their substantial investment in Romania.
The management of the member companies devotes its time individually or in work groups, proposing solutions to the decision makers. FIC has produced six "White Books", setting out detailed improvements which it felt were needed in the business and investment climate, based on research and debate by FIC members.