The ordinance meant to amend the fiscal code, currently under public debate, should eliminate the requirement to submit the statement on the capital gains tax on a quarterly basis, says fund managers, brokers and investors.
“We believe the quarterly submission of the statement on capital gains tax needs to be replaced as soon as possible with an annual one in order to eliminate the considerable bureaucratic effort of tax authority ANAF and of taxpayers. Investors can decide to give up placements in funds if the quarterly frequency of declaring the tax is kept, which will also reduce the possibilities of financing the budget deficit from these sources, given the large amounts placed by investment funds in government and municipal bonds, which are currently worth around 3.8 billion lei,” said Mihail Ion, president of Raiffeisen Asset Management, the largest fund manager in Romania.
Mutual funds faced a significant decline of fresh capital inflows and even witnessed capital outflows, as well as a decline in the number of investors.
The funds have lost over 1,400 investors since the end of September. Almost all balanced funds and equity funds, which also invest money on the stock exchange, are loss-making because of the stock exchange decline.
Under the circumstances, increasingly more investors are bothered by the fact that they have to go to the fiscal authorities and submit quarterly statements while not making any profit.
The same for stock exchange investors, who tended to lose money this year.
Since the beginning of the year, the BET index of the ten most liquid shares on the Bucharest stock exchange lost 17%.
Immediately after the introduction of the quarterly statement in July 2010, the number of active investors on the stock exchange halved and in the last few months their number has fallen to less than 3,000.
“As foreign capital flows to emerging markets diminish, internal saving needs to be encouraged including through a simple way of declaring and paying the tax on gains.
Paradoxically, Romanian taxpayers have to submit 5 statements a year for gains from Romanian placements, but for income earned by the same Romanian taxpayers from investing abroad, they submit one single statement per year,” said Mihail Ion, who specified that there were no similar provisions in any other European country.
The Association of Fund Managers (AAF), the Brokers’ Association and the Association of Capital Market Investors (AIPC) asked repeatedly for the elimination of quarterly statements and for a single annual statement to be retained, but the proposal was not introduced in the draft ordinance to amend the Fiscal Code.
“We cannot hope for the capital market to grow if we don’t support small investors. An efficient tax system that would help this development is absolutely necessary,” say Raiffeisen representatives. They also say the state would also stand to gain from the elimination of the quarterly statement, which currently entails a major effort from ANAF workers.
In 2011, investors submitted around 250,000 quarterly statements, with nearly 500,000 estimated for next year.
On the other hand, the average amount paid as tax is somewhere around RON60 (around EUR14), with a quarter of those who pay tax owing less than RON10, according to Raiffeisen representatives.
“There were even situations where investors were penalized or received a warning from the tax authorities for not submitting on time a statement for a RON1 tax.” (EUR1=RON4.3397)
(English version by Daniela Stoican)