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2.1.2. The taxation mechanism

The tax practice in Romania is using a variety of methods, techniques and methods of assessment, differentiated by:       nature of tax or fee; legal status of the payer; taxable object type; tax base evaluation; tools used; the need of regular revenue for the state budget or local budgets.

All the methods and techniques of assessment of tax revenue for state and imposition instruments give content to the taxation mechanism. Imposition refers to identification of all categories of individuals or legal persons who own or obtain a taxable item, the tax base determination and the tax’s exact amount, taking one of the following forms:  self-imposition, consisting of taxable object identification, assessment and determination of the tax liability by taxpayers on their own responsibility (income tax, value added tax, customs duties and excise taxes);  direct imposition, made by obtaining the information required by the tax authorities directly on the nature and value of the object taxable by the tax declaration prepared and filed by the taxpayer (for example, if the imposition of buildings, land or vehicles);  indirect imposition, if the tax authorities gather the necessary information for imposition indirectly from third parties (for example personal income tax in the case of wages);  standard imposition, encountered when the taxable object is assigned a priori a certain value, depending on which tax shall be payable (self employed who have opted for income taxes on annual income standards: tailors, carpenters, tutors, taxi drivers,). Considering the taxable object evaluation criteria we have temporary and final imposition.

imposition may be an individual (separate. or automatically.  Final imposing. Tax decision is issued. partial) or global:   imposing separate income tax implies person pays a tax for each category of income he/she earns. The goal of imposing process is to identify the taxable object for each taxpayer. In principle. when authorities know exactly all the elements necessary to determine the tax liability (the tax on dividends. . the taxable object is known with certainty and it’s possible to proceed with tax regulation. Tax returns are documents that serve to inform tax authorities regarding: taxes. taxes collected through withholding at source if the payer is required to calculate. contributions and other amounts owed to the general consolidated budget are highlighted in the following fiscal or administrative documents:      tax returns prepared and filed by the taxpayer to the tax authorities. even when no decision has been issued on the tax base. where the tax is calculated by the tax authority. is aggregated and a global income tax is calculated. interest or income from gambling). withhold and pay taxes. This type of imposition is used in the case of corporation tax. Tax decision is issued by the tax authority whenever it modifies the tax base. value of goods and taxable income. the tax authorities impose him a provisional tax and at the end of the fiscal year. if necessary. fees. tax decisions issued by tax authorities. Viewed in terms of how income subject to taxation is aggregated or not. income from salary.TAXATION  temporary imposition is characterized by the fact that at the beginning of the fiscal year or in the taxpayer’s statement. All this must be established and recorded in some specific documents that serve as information support or imposition instruments. those derived from rental and leasing as well as those obtained from self-employed activities. They have various forms for each tax. an accurate evaluation of the base and setting the amount of tax liability. where the income earned by a person in a certain period of time. made after the fiscal year. from several sources. global taxation. fees and contributions due. are different depending on the methods of taxation. on the nature of tax. taxes. or the category taxpayers (individual or legal persons).

2. contributions and other State budget revenues as well as other revenue of central . The tax authorities Tax authorities are all the institutions through which the state achieves the following objectives:       tax files’ record and management. the fiscal body in whose territorial jurisdiction is earned the income. resolve tax appeals against tax administrative acts. fiscal control. b. In this case.3. relevant in determining the tax base. collect budget receivables. will forward the decision to tax authority competent to issue the tax. contributions and other general government revenues. decisions on complementary payment obligations. which is organized and operates as a specialized central public administration institution. preparation and submission of tax returns.TAXATION But there are two situations where tax bases are determined separately by the decision on the tax base: a.1. Subordinated to Ministry of Public Finance is National Agency for Fiscal Administration (NAFA). when the taxable income is realized by many people. and applying the strategy and the program of governance in public finance. The following administrative documents also serve as decisions:     decisions on reimbursement of value added tax. subordinated to the Government. decisions regarding refunds of taxes. when the source of taxable income is outside the jurisdiction of the competent tax authority. which has responsibility for enforcement of legislation on taxes. fees. decisions on the tax base. In this case the decision includes the allocation of taxable income for each person who participated in the creation of income. taxpayer assistance. These objectives are achieved through the central and local structures of Ministry of Public Finance.

measures for compliance. as a structure of NAFA. Another institution with responsibilities in taxation is the State Treasury. The tasks entrusted to NAFA are:      improve the unitary application of the tax legislation. for which has authority. with its central and local offices. according to legislation. refunds and compensations for taxes. within its competency. with legal personality. improving relations with taxpayers. showing payment obligations and payment flows and remaining fiscal debts. applies to taxpayers. in order to prevent. detect and combat all acts and activities that can lead to tax evasion and fraud. except revenue due to customs. social contributions and other budget revenue. At central level. . increasing efficiency in collection of taxes. NAFA is assigned to the following tasks as well:       immediate and unrestricted fiscal control. tracks and take legal enforcement regarding state aid in its field of activity. applies the enforcement procedures and precautionary measures for witch has jurisdiction according to the law. for which has authority. applies the penalties according to legislation. improving performance in tax management. which are organized and operate as specialized bodies of central public administration. The Financial Guard exercises operational and unannounced control. approves facilities. fees. as a result of control.TAXATION public authorities and institutions of the European Community. National Agency for Fiscal Administration has within its structure the National Customs Authority and the Financial Guard. with the exception of fiscal control. in accordance with law. fair treatment of all taxpayers. This institution has the obligation to implement the preventive financial control over the tax collection within the deadlines and to apply late payment penalties for those who fail to comply within these deadlines established in law. administration of which is conferred by laws and conventions. As an institution responsible of tax control. with the main objective of collecting public revenues based on a strict accounting for each payer. subordinated to the Ministry of Public Finance.

to search for a single tax base. however. through taxation. Technical projective tax systems. to prevent and combat tax evasion. we have the single tax or multiple taxes systems or systems with predominance of direct or indirect taxes. The criteria used may be either the nature of prevailing taxes in the tax system. But the most frequent criticism concern the tax 1 Corduneanu Carmen. a.e. This concept is often used in particular meaning. i. public notaries and other institutions that charge fees for various services rendered to the taxpayers. it remains. in this context. to replace them with a general tax on consumption. tax systems based on utopian view are theoretical proposals whose central idea was the institution of the single tax and they started from:  the belief that it is possible to standardize tax levies. c. we consider that the tax authorities are simply the means through which the State implements the fiscal laws.   the influence of different theories sought to explain the formation of income. the necessity to eliminate the large number of taxes levied unfairly. tax systems based on utopian view. to pursue. Classification of tax systems The classification of tax systems is a necessity both on theoretically and practically grounds. b.. the budget revenues and on the other. a single currency in the process of formation of states.cit. in the times when the efforts were directed towards introducing a single system of measuring time. which will prevent the aggregation of many taxes that increase the tax burden. a complex notion. . tax systems based on functional concepts. 2. such as courts. length. they are classified as1: a. Although the single tax is considered by many as a utopia. In conclusion.TAXATION The collection of revenues is achieved with the help from other entities. to eliminate or greatly reduce the number of direct taxes and. p. and. 67-70. meant to. on the one hand. on the other hand. The recent expansion of sales taxes is an expression of this desire. op. According to the views that were the basis for shaping the tax systems. on the one hand.2. either the tax burden characterizing the diversity tax systems.

tax evasion. former socialist countries. Many of the supporters of the single tax mean by uniqueness only a process intended to simplify the tax system or to relief some of the tax burden. certainty.  tax systems prevailing in indirect taxes specific to the emerging countries. countries with economic crisis or military conflicts. not all the authors argue against the single tax. disincentive effects for work. The fact is that any state in distress regarding tax revenues will look upon indirect taxation. by definition. convenience. based on personal income tax and corporation tax. countries whose economies tend to reach the developed status. The main drawbacks lie in their regressive nature. specific to the first administrative statebased entities. and resistance from the taxpayer. • the tax systems of most developed countries. ancient type. flexibility and unambiguous incidence and the disadvantages concern complexity. indirect tax advantages are the universality. is intended to replace all other taxes. investing or saving. flexibility. while others are predominantly indirect taxes. b. In some tax systems are predominant the direct taxes. It is quite difficult to associate one or the other type of taxes with the degree of economic development of a country. the limited possibility of evasion. they include: • rudimentary tax structures. These are specific . which involves choosing a very high level of taxation to guarantee the tax revenues at least equal to those acquired through taxes that would be replaced. tax systems based on functional concepts take into consideration their dominant characteristics. b1. inflationary effect and distortion of consumer preferences. On the other hand.TAXATION rate which. increasing the share of such taxes in difficult situations. increased compliance cost. Classification can be done in two ways: by the nature of prevailing taxes and by the intensity of tax burden. According to the nature of prevailing taxes can be identified:  tax systems prevailing in direct taxes. simplicity and low compliance cost. characterized by similar proportions of direct and indirect taxes in total tax revenue in certain periods of time. optional nature. The main advantages of direct taxes are equity. However.  predominantly complex tax systems.

value added tax) and the fiscal system is highly organized. and public services are extensive. b2. with balanced social and economic structures and socialdemocrat type political regimes.  tax systems prevailing in specific taxes. If the tax burden is taken as a criterion for identification of tax systems. characteristic to undeveloped tax structures. which is considered to be the decisive factor in the typology of tax systems.TAXATION to developed countries.  large share of tax revenue in GDP (over 25-30%). Although they do not satisfy the conditions above. specific to underdeveloped countries. For a tax system to be considered as “heavy” or “high-tax” must meet the following conditions:  the share of tax revenue in total public revenue must be high (more than 8090%). and to current emerging countries where direct taxes are levied on some significant types of income and the indirect taxes on some products designed to domestic consumption or export. A constant feature of emerging countries is lower tax burden.  tax systems prevailing in general taxes. where taxes are imposed on certain categories of income. economic and sociological causes. characteristic for developed countries. In terms of this distribution. it must be completed with the distribution of different types of tax levies within the tax system. where the participation of public capital versus private capital into the real economy is weak. where are predominant the general taxes (personal income tax. combined with the predominance of indirect taxation. the predominance of direct taxes is generally regarded as the main feature of taxation in developed countries. the former socialist countries are characterized by high tax systems. emerging countries and “tax havens” where tax revenue share in GDP is lower (10-15%).  Low tax systems. The factors that shaped the fiscal development consists in a series of obstacles related both to historical causes. specific to the most developed countries. According to the tax burden level. because of the existence of transitional government bodies. major financial needs and the necessity of important reforms. corporate income tax. one can identify:  high tax systems. as lump sum taxes or ad valorem taxes. The uncertainty regarding tax resources is further .

net wealth). we consider that the process of modernization. c. In the context of improving the tax systems. the factors of influence and how the tax system can be modeled in order to achieve certain predefined parameters. levied only on one element of the taxpayer. to eliminate the risk of social confrontation and to ensure consistent sources of funds for the public needs. which belongs to the taxpayer (global income. Technical projective tax systems give substance to theoretical works and government projects. The aim of these theoretical projections is to develop such a tax structure able to ensure a more equitable distribution of tax levies among the subjects in the economy. determined according to an economic variable considered entirety. . the use of taxes to achieve some specific policy objectives. which approaches the future of tax structures and are aimed at improving the current tax system in line with the dynamic development of economic and social structures in terms of ensuring the resources necessary to fund social needs of communities and to achieve equity and efficiency in taxation.TAXATION exacerbated by widespread tax evasion that a weak and often compromised administration is not able to limit. while reducing distortions they cause. turnover. is characterized by:  a shift from analytical taxes. increase tax yield.    adoption of new methods of imposing and collection of taxes. in the current stage. towards synthetic taxes. However. the design of such a tax system requires an analysis of the elements and the relations within the system.