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Lect. BRAGA, Viorica PhD Spiru Haret University, Faculty of Accounting and Finance Campulung Muscel, Romania Lect. ZĂRNESCU, Odi, Mihaela PhD Spiru Haret University, Faculty of Accounting and Finance Campulung Muscel, Romania Eng. ec. ms. MIREA Gabriel*** Valahia University Faculty of Economics Târgovişte, Romania
Abstract: In this article we present limits, ways of commensurate, the influence factors and effects of the fiscal pressure. Also, the processed data from the Statistical Yearbook, we presented the evolution of this rate during the period 1990-2009. JEL classification: K20, K34
Keywords: fiscal pressure, Laffer curve, GDP, taxes, fees, contributions
1.INTRODUCTION The taxes are an "evil" for those who support and a "necessary" to supply the public budget, being the most important source in this respect. The honest taxpayer agrees to pay the tax and is subject to this burden willingly, but at a time when taxes exceed certain limits, occurring phenomena that lead to serious disservice of the state's capacity to collect this revenue. The taxpayer behaviour becomes abnormal in any way he tried to evade from the tax, hoping to reduce the fiscal pressure, which is sometimes suffocating. Increase or decrease the fiscal pressure for a certain period is related to the economic and social role of the state, its intervention, to ensure the source of the coverage the public expenditure. The debate generated by the excessive intervention of the state in the economy, have generated a new economic thinking, a liberal thinking that we observed at the American economist Arthur Laffer. 2. RATES OF TAX BURDEN AND ITS LIMITS The fiscal pressure is an economic measure of coercion exercised by a tax or a combination of taxes. In the sense of the most audiences, the fiscal pressure is called the tax coefficient, being related by the taxation rate . Whatever the terms used such as the fiscal pressure, tax burden, tax factor, the rate of compulsory levies etc. (some even trying to mitigate the negative connotations expression), the general idea is that the obligations beside the state and reducing the private income.
strike. reduces the productive activity. Economic limits. namely. a very strong fiscal pressure. fraud. protests. However. . according to the state's involvement. the diversity of its powers and the development of socio-historical stage. when a low taxation. Laffer believes that there is a threshold for the maximum rate of the fiscal pressure beyond which any increase thereof. or the levy additional is based on size of taxation. requiring an increased levy income from its funds. low investment and desire of the people to save and reduce the entrepreneurship. in the narrow sense. tax must be loose. save. in order to discharge its obligations. that tax rates are too high. an increase of it may stimulate efforts to achieve stability of disposable income. In this respect. a reduction of gross domestic product and a drop in tax revenues. Laffer curve is a graph that shows the relationship between the compulsory levies rate and the total revenue collected by the state tax. The fiscal pressure. through the public spending it finances. the question is: how much can increase the taxes (at a time). which consider that the compulsory levies may result in curbing the propensity to work. not rigid for the taxpayers. Arthur Laffer. stifling the private initiative. our country has not reached stable tax legislation. low investment and desire to save people and reduce entrepreneurship. Compensation induced by the fiscal pressure. If it is applied a high taxation. produce and work. destroying the basis on which taxes are placed. generates a reduction in tax yield. During the transition to a market economy. an outstanding representative of the so-called “policy proposals”. discourage the taxpayers (individuals and entities) to invest. so this does not reflect a loss of tax revenues for the government? According to the liberal economists. resulting in an economic growth and an increase in tax revenues. Economic limits. Generally. On the rising of fiscal pressure is considered to be increasing the economic role of the state. This value corresponds to the maximum amount of the tax revenue (the point of maximum curve). which is expressed by the fact that they constitute a benefit to taxpayers. while it is considered that the increase in state spending. implement graphics (Laffer curve) and expressed an idea of his predecessors. refers to the ratio between the amount of taxes collected and the gross domestic product. a further increase of it can result the tax evasion.The fiscal pressure rate or the compulsory levies rate in the broad sense is the ratio of the total taxes and the social contributions actually charge by the general government and the gross domestic product. through: evasion. A permanent changing of the level of tax rates and the emergence of the new taxes lead to the different forms of the fiscal pressure and diversity of some limits . which are compulsory levies that may result in curbing the propensity to work. the taxation and the pressure had an upward trend. fostered by the financial and economic levers (taxes) but also the instability of the tax system. Psychological and political limits that are imposed by the side of taxpayers which may oppose a strong resistance to increasing the compulsory levies when they consider being excessive. So the fiscal pressure is related by the tax imposition. The level of fiscal pressure is given by the fiscal policy.
increasing the fiscal pressure leads to the lower production. an increase in the rate of taxation. the discouraging effects of taxation. is a growing segment of the income of production factors. is diminishing tax revenues. where the economic support increasing the fiscal pressure. Tax revenues (IF) 100% tax rate Figure no. from the M point. it may place on the one side or the other of size M. shaded. But there is an optimal tax rate beyond which the total tax revenue will decrease if the tax rate will continue to increase.1 Laffer curve At the same amount of the fiscal pressure. Therefore. Traders repudiate the new public utilities. . carry around. the tax revenue growth is weakening. . economic agents reduced their taxable activities and tax base decreases. The fiscal pressure is increasing while reducing production occurs concurrently with increased underground activities. once increases the fiscal pressure.The compulsory levies value would go up to cancellation. opting to increase the expense of leisure time for work and other economic. a harsh and unequal taxation creates serious difficulties in the development of production. is taken by the state.The normal permissible OMPO. Thus.The inadmissible or prohibition PoMP area. from zero to 100%. although there is a gradual decline in economic activity and tax base. as will a larger amount of public utilities. the countries with different levels of economic and social development. if tax rate would reach 100% value (in this case the limit. not unconditional and substantially increases of the tax revenues . The tax revenues increase. certain economic. Apparent existence of two areas. agreeing ones private. so that the current economy required a reduction in the tax rates and a gradual reduction of the income tax in order to promote the re-launch the economic activity. Laffer believes that. bounded by points OMP as: . may lead to higher tax revenues. causing a decrease in production. For Arthur Laffer. This is explained by the fact that compulsory levies too hard destroying the tax base. so. any taxable activity would disappear). In terms of Figure I.
Considering this expression as the ratio of the fiscal pressure rate broadly. where PIB (1) R.7 GDP deflator index 1. the fiscal pressure is given by the tax rate. local.Although the theorists have often tried to establish certain maximum levels.state social insurance contributions.54 1990 Real tax incomes (mil lei) 1990 =100% 29.29 Year RealGPD (mil lei) 81. WAYS OF EXPRESSING THE FISCAL PRESSURE Since the tax is charged by the taxpayer. can establish the fiscal pressure rate in the narrow sense as: Rr = I T *100 PIB (2) Also. because the fiscal pressure is more than a perception. as an amputation of his income by the public authority we must recognize the need for quantify it. Tax ceiling is floating. PIB. by removing the numerator of the state social security contributions. political and psychological. by reporting only the social security contributions to GDP are calculated the fiscal pressure rate for social purposes. Rising domestic tax The national fiscal pressure In general. which varies according to the economic circumstances.amount of the taxes collected. the fiscal pressure rate is calculated as follows: R= I T C * 100. The processing of information published in the Statistical Yearbooks collection or on the site of the Finance Ministry. I. including social contributions) paid for a certain period and size of gross domestic product in the same period. sooner or later. Table no.051 Real tax incomes (mil lei) 28.73 RealGPD ( mil lei) 1990 =100% 85.the fiscal pressure rate at the national level. it has exceeded every time. on the implementation of the various budgets that make up the system unit budgets in Romania. C. at different levels. the practice. changes in the fiscal pressure rate during 1990-2009. Considering the tax revenue as consisting of taxes and contributions.70 . 3. 1 Evolution of the fiscal pressure in period 1990-2009 Nominal tax Incomes * (mil lei) 29. the usually one year.volume of gross domestic product. we present in Table no. which is calculated as the ratio between the total tax revenues (at central.73 NominalGPD (mil lei) 85.total amount of the taxes collected. 1. T.
55 23748.89 20.10 69.085 131303.84 22.63 22.048 109932.07 71.4 25293 2.07 200.82 76.11 87.7 54573 1.66 118.02 479149.7 80377 1.20 80.52 94.00 26.7 1.24 212756.52 2924.36 84984.6 37379.13 96773.22 53564.03 143.26 22.055 129096.65 36923.87 55701.48 70.2 513950 1.66 10541.06 371946.97 626.29 2081.3 287186 1.951 24.8 10891.3 7213.64 136196.94 7496.71 34.82 1.8 389800 1.234 33824.68 68.76 36.478 12512.2 602.96 1.73 165494.95 75.00 35.00 34.453 2012.83 10227.65 115208.23 98.07 23.00 29.50 41739 151475 1.14 30.61 257797.48 79032.19 21.552 6792.87 27.41 473686.00 28.00 31.55 5331.274 191.13 71.6 2003.353 1537.158 58397.74 316467.2 4977.94 18493.29 21.00 33.47 19.15 122751.00 30.114 70944.07 76.473 2709.391 587.43 133.5 116768.082 89439.194 44861.00 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 Tax rate (%) Source: own processing of the data from the Statistical Yearbook .374 24123.93 79.3 220.1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 ** 2009 73.39 611.84 74. 2 Development of the national fiscal pressure in the period 1990-2009 36.00 32.39 2.3 505503 1.56 142464.76 Source: own processing of the data from the Statistical Yearbook 24.19 6701.16 23.96 1404.03 74.68 201.72 * This category includes taxes and social security contributions ** Provisional values Figure no.55 1.62 20.57 3.61 72.88 39.443 16457.60 108.9 197600 1.14 67624 246372 1.73 21.8 342418 1.27 24084.32 33145.32 2.93 21.72 25.00 25.69 2080.92 3 67.00 27.
the fiscal pressure has decreased by 6%.Level of economic development.69%. the fiscal pressure decreased. So. this indicator was the minimum value 26. The higher quantified taxes in the numerator are calculated according to rates. as long as it remains locked into some random elements. etc. often occult nature of the incorporation of taxes in prices. after taxes they can satisfy the subsistence needs. the level of public expenditure. to the operator. During 19942009. the reported period 1990-2009. However. . such as diversity of abstraction. To calculate the amount of taxes and contributions collected we used the information presented in the general consolidated budget.Structure and forms of ownership. to estimate and the individual fiscal pressure felt the psychological aspect. 1 and in the graphical representation of the Figure no. 1.As it is seen from Table no. the individual fiscal pressure should be examined in terms of purchasing power of net income to see how. the fiscal pressure is very difficult to quantify. the higher total amount of taxes will be. 4. Vaf – the value added by the company. the taxes which they are paid to the state are perceived as elements of fiscal pressure. The individual fiscal pressure In addition to the fiscal pressure measured at the national and traders. In 1997.Public needs set by government policy. The rate fluctuations were caused by frequent changes in the level of taxation. It is defined as the ratio between total tax levies incurred by the taxpayer (individual) and the amount of gross income derived by them (income before tax) At this level. tax progressives action. which will pass the size given tax rate. the fiscal pressure was 34. savings and leisure. immediately after the December. The fiscal pressure at the business level For the businesses taxpayers. the volume of public services that benefit the taxpayer.89%. FACTORS OF INFLUENCE AND THE EFFECTS OF RISING THE FISCAL PRESSURE The size of the fiscal pressure rate is influenced by many factors. of which we mention : . being an average value within 26-29%. . over the years in 1991. Basically. 1989. the more pronounced. Rf = If Vaf *100 where (3) Rf – the fiscal pressure rate to the company. which measures the threshold of tolerance to the taxes. If – all other charges payable by the operator. with both made their share in the value added is higher. beyond these mathematical estimates. .50% and in 1999 this indicator reached the maximum level of 33.
Thus. In the literature. Increasing the fiscal pressure beyond the threshold deemed acceptable. the risk of inflation through taxation. in terms of incitement to work. the relations with the outside. such as: weakening of productive effort. whose evolution is subject to certain "legitimate" economic.The degree of adherence of the population in the government policy and the level of willingness to pay taxes. saving and investment. the public loans are called (and is) "tax deferred". on the one hand. diminishing the ability of self-financing. In view of many experts. labour practiced allows the employee to obtain unreported income (main or supplementary) and the employer to evade payment of taxes and social charges (related to undeclared work). the "black". In the long term. decreased purchasing power due to taxes. there are some negative phenomena. however. (submission of additional work in order to offset the loss of net income due to higher taxes). fraud and tax evasion and the underground economy. Any increase in mandatory levies borne by businesses. representing a growth factor of public expenditure. that high levels of taxes have on work. . in which increasingly active. thus fuelling inflation. a) Decreased production effort. to face resistance from increasingly powerful and secondly. financed by taxes. therefore. to create a great handicap local traders in front of an international competition.Effectiveness of public expenditure is used. The explanation lays in the attempt. government borrowing through debt service. d) Reduce international competitiveness. Extent is closely linked to the high level of taxation. the main cause of increasing fiscal pressure is the continuous growth of public spending.State of democracy. may on the one hand. investment and modernization. Thus. more and more aggressive. with repercussions on the level of future fiscal pressure. c) The shadow economy is a phenomenon by which various forms of activity have the characteristic avoiding paying taxes. is reflected in the price level of their products.. employees attempt to recover the form of higher salaries. . the fraud and tax evasion. b) The risk of inflation through taxation comes from the fact that any increase in taxes and social contributions they tend to pass on the process of quantification of prices and wages. increasing the fiscal pressure leads to two types of adverse effects: the substitution effect (reduced working time of employee salary reduction resulting from tax) and income effect. etc. social and political. on the other hand. . In connection with the option for government borrowing to finance public expenditure growth in the short term it may be seen as a factor in reducing or maintaining the level of the fiscal pressure. In cases of exceeding of the optimal rate of fiscal pressure in specific socioeconomic. reducing competitiveness national. the firms included in their selling price plus tax and social contributions that support and. The liberal economists have noted the effects of discouraging. which reflected negatively on the competitiveness of that enterprise. being a particular aspect.
the low level of it could be explained by poor collection of taxes and a high level of avoiding the tax.7%). our country has reached stable tax legislation. Romania joined the EU. because the fiscal pressure is more than a perception. these are impossible to commensurate to the real their level.50%. Should. leading to different forms of the fiscal pressure and it presents some limits. was determined based on the tax revenue actually collected and not those due. based on revenues collected. we cannot say that there is a maximum level.Analyzing the fiscal pressure rate in the period 1990-2009. 2001. but also with the lowest share of GDP budget revenue 28. Bucharest. we found that it fell to the first months of 1989 by 6%.46% . Bucharest.55%. can not speak of an excessive tax. Bucharest 2007 p. Fiscalitate. while the European average was 38. During the transition to a market economy. 77  Carmen Corduneanu. Moreover. such as diversity of abstraction. which varies according to economic circumstances. the action of the progressives’ tax. including the social contributions. the Nordic states: Denmark / 59%. the tax ceiling is floating. this indicator reaches the maximum level of 33.26 %. which can be added. Finland / 50. Fundatia România de Mâine Publishing House. noted that the level of taxation.5. The tax rate lying below 30% of overall GDP in Romania.The fiscal pressure is very difficult to quantify. Codecs Publishing House. and at considerable distance. many tax facilities granted over the time. When the level of taxation is determined using the tax revenue actually collected.The level of the fiscal pressure is given by the fiscal policy fostered by the financial and economic levers.CONCLUSIONS . 343  Moşteanu Tatiana. respectively the tax revenues stolen to the consolidated budget tax are not considered. Netherlands / 52%. REFERENCES  *** Dicţionar de economie. so in 1997 this indicator was the minimum value 26. .  Cioponea Cristina.Limits of the fiscal pressure are psychological and political boundaries. 211 . Also. however. with the lowest income tax individuals (16%. 439-441. University Publishing House . Bucharest 2008. Impozite şi taxe. the trend that is evident today. Sistemul fiscal în ştiinţa finanţelor. political and psychological. 1998. Economic Publishing House. p. often occult nature of the incorporation of taxes in prices. the volume of public services that benefit the taxpayer. with 50%. Sweden / 56. p. p. at national level is to reduce the level of taxation. ediţia a II-a. . over the years in 1991.89%. Finanţe publice şi teorie fiscală. . Changing the level of tax rates and the emergence of the new taxes. as long as it remains locked into some random elements. and in 1999. economic boundaries and awareness of compensation induced by the fiscal pressure. but the taxes and uncertain-tax system. The "neighbourhood" was still only Slovakia / Bulgaria 19% / 24%.and Belgium.
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