Let us bet: How much will be the VAT next week or month? 4 questions – problems from the continuous change of taxes
Last night the Senate decided to bring VAT back to 19%, modifying the government's decision less than 2 months ago. This is a proposal that has to be approved by the Parliament. Despite my strong desire to comment upon the news, I will not do it. This is how Romanian politicians understand their duty to their voters and the society and I will let Romanian citizens to comment. (Plus I always prefer to stay out of political disputes).
But this news creates new problems in the Real Estate market plus it damages the economic environment furthermore. Let me share with you 4questions – problems that we will face during the following weeks and months…
1. What should I say to my clients? Which are the taxes in Romania?
It is simple and clear: Every foreigner who wants to invest in a new country asks about the taxes. What should I tell to my clients when they ask me? Every week we hear news about changes. "The VAT will go up, the profit tax will go down" or vice versa. VAT increased, VAT decreased, pensions were cut, pensions were not cut. Is there anyone out there who realizes that this uncertainty simply makes people halt, waiting for the final situation to be clear (if not turning back their back to the country)?
2. What will happen with the higher taxes that people paid during the last 2 months?
I can not say that this summer was full of transactions, but there were some. Plenty of them belonged to the category of properties whose transaction includes the VAT payment, so some hundreds of people paid a higher VAT, 24% instead of 19%. So, if VAT returns to 19%, what will happen with these investors (or tenants of buildings)? They will just be informed that they were stupid and lost their money? Or "one day they will receive their money back from the State"?
3. Potential problems in some contracts. Is there any hidden trouble?
I personally know cases where the rental contracts are written in a way which describes the obligation of the tenant to pay the rent plus the VAT, considering (the contract) that the VAT will remain the same or will increase. Now if the VAT will finally return to 19%, there can be problems of "translation", if the lawyers have not made a good work. (yeah, I know… they are usually perfect, but sometimes it may happen…)
4. "What's gonna happen tomorrow?"
I don't know if you realize it, but when foreigners talk about Romania, they don't separate politicians. Like how you talk about Greece, you don't say "the good ones or bad ones". So right now Romania appears to be a country which "tries to take back" an important measure and changed its mind for this. This country appears to have implemented this measure (VAT increase) in order to receive the loan installment by the International Monetary Fund and now it tries to redraw it, like "tricking" IMF. But in the following weeks and months the country will need more money, as the revenues are not so good. What will happen then? It will also take measures and cancel them after 1 – 2 months?
Unfortunately the problems here need urgent (and serious) solutions. With all these "back and front" moves, the only thing that Romania succeeds is to harm the country's overview. And it is the only country in the world which dares to give this overview, during the worst economic crisis since decades.
Very soon, during the autumn, the country will be forced to undertake more painful measures. And after last night's decision, IMF and other foreign organizations will continuously doubt for Romania's determination to solve its problems. I hope that all these will not become as bad as they seem…
Just 2 weeks ago I was writing:
The world leads to double dip recession and Romania is heavily influenced:
Elena Aug 25, 2010
I think that the serious people who live in this country have the feeling that they are just toys in the hands of some children who are fighting over them, because this is the attitude of the people who lead us: childish and irresponsible.
And I think this attitude comes from their certainty that everything will be ok for them and nobody can punish them. Their lack of fear makes them irresponsible.
Meanwhile, people I know, people who are dear to me, people who are well prepared and who can do a lot of good things in this country, decide to leave to countries where they are fully appreciated.
The dramatic question is: “Who will stay to turn off the lights?”