Viability of liberal professions' economic effectiveness in the context of the new fiscal changes in Romania

• Published date: 01 January 2021
• Author: Cristina G. Cosmulese,Riana I. Radu,Monica L. Zlati,Marian Socoliuc,Valentin M. Antohi
• Date: 01 January 2021
• DOI: http://doi.org/10.1002/ijfe.1847

RESEARCH ARTICLE

Viability of liberal professions' economic effectiveness in

the context of the new fiscal changes in Romania

Valentin M. Antohi

1

| Monica L. Zlati

2

| Riana I. Radu

1

|

Cristina G. Cosmulese

3

| Marian Socoliuc

3

1

Faculty of Economics and Business

Administration, University of “Dun

area

de Jos”Galati, Galați, Romania

2

Department of Accounting, Finance and

Economic Informatics, Stefan cel Mare

University of Suceava, Suceava, Romania

3

Faculty of Economic Sciences and Public

Administration, “Stefan cel Mare”

Suceava, Suceava, Romania

Correspondence

Valentin M. Antohi, Faculty of Economics

and Business Administration, University

of “Dun

area de Jos”Galati, 59-61, Nicolae

B

alcescu Street Galat¸i, Romania.

Email: valentin_antohi@yahoo.com

Abstract

In the current economic flow generated context, the services provided by lib-

eral professions have become a link between producers and suppliers of prod-

ucts, services and end-users. The objective of the study is to delineate the fiscal

debt sustainability threshold and its impact on liberal professions specific

activities. A subsequent objective is to highlight the impact of the independent

activities of the liberal professions at the micro and macroeconomic level by

developing a model of circular interdependence, between the inputs and out-

puts of resources, services and the critical point from which it can produce

value, continuity and growth in activity. The results of the study are based on

the definition of the role of the liberal profession in the context of the current

economy in Romania, as well as on the demarcation of the critical point from

which the economic spiral can create added value and profitability.

KEYWORDS

Circular interdependence model, critical performance point, fiscal impact, liberal professions,

tax debt

JEL CLASSIFICATION

H 21; H 30

1|INTRODUCTION

As the increased efficiency of economic activities implied

outsourcing services, the importance of liberal profes-

sions has increased significantly in the current economy,

as their driving role is paramount. The use of the human

resources engaged in the liberal professions generates

quality outputs that are currently rendered profitable by

a remuneration that is up to par with the service

provided.

The emergence of liberal professions on the Roma-

nian service market has occurred quite recently, as a

result of a process of individual specialisation and voca-

tional training; the human resource thus trained cannot

be remunerated sufficiently within legal entities, due to

the reduced frequency of the need for services, compared

to the needs of the entity. These professional services are

characterised by a specific regime that is repetitive in

nature and is aimed at all the entities existing on the

market at a given point in time. Liberal professions

include the following socio-professional categories: law-

yers, doctors, bailiffs, notaries, forensic experts (technical

or specialised in accounting), public accountants, certi-

fied accountants, tax consultants, financial auditors,

translators, architects, etc., as detailed in Annex no. 2 to

Law 200, 2004 on the recognition of diplomas and profes-

sional qualifications for regulated professions in Roma-

nia, updated.

European Member States apply more or less restric-

tive definitions to the concept of liberal profession, and

Received: 7 July 2018 Revised: 11 October 2019 Accepted: 18 June 2020

DOI: 10.1002/ijfe.1847

1236 © 2020 John Wiley & Sons, Ltd. Int J Fin Econ. 2021;26:1236–1255.wileyonlinelibrary.com/journal/ijfe

in some states they are non-existent. Certain Member

States consider that only a small group of professions are

included in the liberal professions category: medical and

advisory professions, such as lawyers, tax consultants,

auditors, guidance counsellors, engineers, and architects.

In addition, artistic professions (EESC 2014) are also

included in this category in some Member States. Liberal

professions are organised in professional bodies or associ-

ations, which aim to regulate aspects of the professions

such as their functioning and professional ethics, as well

as ensure the access and continuous training of their

members.

In Romania, the National Tax Administration Agency

(ANAF) has regulated the taxation conditions for liberal

professions in the 2016 tax guide. According to this guide-

line, liberal professions are free to choose the premises

and the way in which they conduct their activity, as well

as their working hours, working at the same time for one

or several clients, assuming the risks inherent to their

profession and using their own assets (2016).

As for conducting these activities directly, through

employees or by cooperating with third parties, these are

not mandatory conditions for the liberal professions.

However, the income earned from these professions is

subject to the actual income system method, as self-

employed income. In the context of the current economy,

expenses incurred by professionals are fully or partially

deductible, so that deductibility is only possible when the

expenses are related to the revenues. The economic activ-

ity is, in this respect, relatively interdependent with the

liberal profession, in that it uses in full the outputs of the

liberal profession and creates partially tax deductible

inputs, thus contributing to a relative added value

(in case of the high taxation of the activity of liberal pro-

fessions and of the services resulting from this activity). If

the fiscal formalities were sufficiently outlined, the

impact on the economy would be more significant, and

the increase in activity could generate resources for the

incorporation of technologies or innovations into the pro-

fession. For example, in the case of liberal professions

dealing with valuation, a more lenient taxation system

could allow professionals to have enough resources to

acquire valuation-specific software, without having to

depend on financial indebtedness; this software could

increase the quality of the valuation process and at the

same time it could be a source of revenue for the IT seg-

ment which is responsible for its creation. The need for

this study, whose objective is to outline the fiscal debt

sustainability threshold and its impact on activities spe-

cific to the liberal professions, is therefore very clear. The

empirical and econometric analyses demonstrate the

need for fiscal reconfiguration and the risk that the new

fiscal policy brings to the entire economy in general and

to liberal professions in particular.

2|LITERATURE REVIEW

In general, the liberal professions provide services for the

proper functioning of the economy as a whole.

(Percinschi & Maier, 2016). According to the meaning

accepted by the European Union, liberal activities are

intellectual in nature and require a high level of qualifi-

cation (European Court of Justice, 2001). According to

the Directive 2013/55/EU on professional qualifications,

liberal professions are regarded as activities conducted

based on appropriate professional qualifications, in a per-

sonal, responsible and professionally independent man-

ner, which are oriented towards the interest of the client

and of the general public.

The contribution of liberal professions to the proper

course of a state's administrative, political, and economic

life is recognised at national and European level, as they

facilitate the modernisation and the increase the effi-

ciency of the public administrations and of the services

aimed at citizens and consumers. Criticisms arise some-

times, aimed at certain shortcomings related to quality

control and quality assurance, which are usually due to

implementation problems, as they are not identified as

system failures (EESC 2014). In order to avoid the oppor-

tunistic dissemination of financial information, the audi-

tor (or other persons who belong to the social and

professional category of the liberal professions) inter-

venes to render this information more credible, acting in

his/her certifying capacity (Ardelean, 2014).

Most businesses developed in the current economic

environment are based on maximising economic perfor-

mance by minimising the use of resources and by

increasing tax efficiency (Anderson Jr, Parker, &

Tan, 2013; Eisenmann, Parker, & Van Alstyne, 2011; Van

Alstyne, Parker, & Choudary, 2016; Mates¸, Bostan,

Grosu, & Virag, 2012). In this context, either of the two

components that generate profitability (resources or taxa-

tion) can influence the system disturbance and is sanc-

tioned by the economic agents, at the level of the

economic activity that is being conducted (Bockstedt &

Goh, 2011; Moreno & Terwiesch, 2014).

Internationally, this phenomenon is sanctioned in

statistics as offshore business migration (Blinder &

Krueger, 2013). On the other hand, the increase in taxa-

tion or in consumption of resources results in a restric-

tion of the employment rate through the labour

productivity monitoring and control mechanism

(Srivastava & Teo, 2012). Thus, as shown in the study

ANTOHI ET AL.1237