For a long time, companies have been held responsible for any misstatements they make in declaring any kind of taxable base. When the tax authorities re-assess the amounts declared, they not only demand the payment of more tax, but also of late payment penalties, and these have proved to be quite a burden. Some companies have faced such re-assessments by the tax authorities many times.
Now, the tax authorities are increasingly turning their attention to individuals. They are paying more attention to the way individuals declare their taxable base, and are looking at issues like houses, cars, yachts subject to local taxes, or simple income from various activities, such as renting apartments or from agriculture.
The tax authorities may investigate how the taxable base has been declared by individuals. If an individual becomes subject to such an investigation, he or she is first required to submit a specific declaration and then the accuracy of the declaration has to be proved.
At the same time, individuals earning income from agriculture are monitored more strictly on how they pay the related tax. Where no fiscal administration exists in the locality where the taxpayer lives, a protocol must be concluded with the local authorities, who will ensure collection of the relevant income tax.
Generally Romanian legislation applies fundamental principles of taxation quite effectively. However, it is complex in some areas and can be open to different interpretations. While taxpayers have a responsibility to know the laws that apply to them, they cannot be expected to have the degree of technical knowledge needed to understand all the subtleties of how legislation is to be interpreted. So the tax authorities should do more from the start to help honest taxpayers understand clearly what they need to declare and pay, rather than imposing penalties at a later stage. The OECD has encouraged its members to put in place a better consultation system between taxpayers and the tax authorities, and although Romania is not an OECD member, this is still a useful recommendation. Consequently, the Romanian tax authorities should aim to develop a more effective partnership with taxpayers, as the best way to encourage compliance and enhance rates of collection.