The measure may rather be viewed as an alignment with overall monetary policy. As the interest rates charged in the banking system are lowering, the tax authorities have most likely decided that they need to follow suit by reducing the penalty interest rates charged for non-payment of taxes.
The National Bank of Romania (NBR) announced a decrease in the Reference Interest Rate to 3.5% (in February 2014), from 4% (in December 2013). This announcement comes in the context of the European Central Bank (ECB)’s current policy of maintaining the ECB Reference Interest Rate at 0.25%. Inflation in the eurozone has now been predicted to be around 2% in the period up to 2016, a slight decrease compared to previous estimates. Romania’s Reference Interest Rate is likely to remain between 3% and 4% in 2014, while inflation is expected to be around 3 – 3.5%. However, the potential increase in excise duties on fuel would put pressure on the Romanian economy and could lead to inflation rising to higher levels than the NBR has predicted.
The NBR’s decision to reduce the Reference Interest Rate will have a positive impact in terms of interest rates for credits, which can be expected to fall too. In the medium to long term, the reduction in the Reference Interest Rate could stimulate foreign investment and encourage business activity in Romania. In the short term, we can expect to see an increase in the consumer price index determined by a growth in consumer confidence, leading to higher consumption, while we may well see a slightly depreciation of the RON against the EURO in the near future.
On the international scene, many developments in transfer pricing are taking place. International organizations which provide guidance on the theoretical framework for transfer pricing have recognized an impasse in the application of the comparability criteria. I have become used to saying that perfect comparability is more a myth than something which can really be applied in practice. In the end, estimating the price that an independent company would have paid or received involves assessing the profits which an independent company would have earned for that business. But the particular economic circumstances of each company and the context in which it operates mean that this figure is notoriously fickle.
Moreover, the OECD has officially acknowledged that it is becoming more and more difficult to obtain a set of information which may be reliably used by both taxpayers and tax administrations as a basis for comparison. It is essential, in my view, that taxpayers should be given access to information if the authorities want to see them acting in good faith on transfer pricing. Furthermore, the tax authorities should only use publicly available information. Confidentiality should fully protect the use of the financial data of private companies which the tax authorities acquire in the course of performing their professional duties.
Non-cash payments continue to be encouraged by the tax authorities. This is a measure to facilitate monitoring of transactions and related payments, which give an indication of a potential taxable base. It is to be hoped that the authorities which supervise the Environment Fund will fall into line with the trend towards non-cash payments and drop the newly introduced obligation to have a receipt “chitanta” (which in theory serves as a supporting document for cash payments) for transactions involving batteries.