Romania To Stop EC Infringement Procedures Over Tax Evasion Law Before Penalties - Fin Min

Vladescu told a news conference that infringement was a calculated risk, caused by the need to counter tax evasion in the fields of intra-community VAT and certain evasion-prone types of merchandise.

The minister said that the decision to enforce the measures against tax evasion for a limited period of time will reduce EC infringement procedure penalties. Vladescu added that Romanian authorities are pledging to do "whatever necessary" to have infringement lifted before penalties are applied.

According to Vladescu, the ordinance against tax evasion will come into force this week, or by the end of the following week at the latest.

The European Commission said Monday that the ordinance "raises a number of concerns with respect to its compliance with EU tax and excise legislation."

The EC said the Romanian Government allowed the Commission a very short span of time for comments on the ordinance, and that local authorities did not take the Commission's remarks into account. The EC highlighted it will reiterate its remarks on the ordinance and will call on Romanian authorities "to address the points that are not in line with EU law as soon as possible."

Romanian Prime Minister Emil Boc said the Government decided on May 30 to implement through am emergency decree new measures to fight tax evasion.

The emergency decree proposes reverse taxation and introduces VAT on trade with cereal, fruit, vegetables, meat, fish, flowers and construction materials within the European Union.

The bill also reintroduces excises on luxury items, even though the country risks EC sanctions for breaching EU legislation. In October 2009, the Government had decided that, starting 2010, excises on luxury products would be eliminated to avoid EC infringement procedures against Romania.

The Government will shut down duty-free shops by not renewing their licenses upon expiry, it will extend the powers of the Financial Guard and Customs Authority inspectors and will allow them to stop vehicles for checkups.

Also, individuals crossing the Romanian border who fail to declare amounts of EUR10,000 or more will be charged with a crime and imprisoned for two to seven years.

A "Registry of intra-community agents" will be set up on July 1, comprising all legal persons and firms which carry out intra-community trade. The registry aims to enable better monitoring, provide higher budget revenue and fight tax evasion.

Under the new EU VAT system, intra-community supplies of goods are exempt from VAT in the member state of dispatch when they are made to a taxable person in another member state who will account for the VAT on arrival.

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