The Romanian Sports and Fitness Industry Association, RomaniaActive, expresses its disagreement and concern regarding the adoption of a higher VAT rate, which would lead to the destabilization of economic operators in the Health and Fitness Industry. This statement comes in the context of discussions concerning proposed changes to the Tax Code, the preliminary outcomes of which have been disclosed in the public domain.
The Physical Activity, Sports, Health & Fitness Industry plays a crucial role in promoting health, and from this perspective, the direct impact of increased VAT on companies operating in sports, health, and fitness cannot be ignored.
As Health and fitness services become more expensive due to higher VAT, fewer people will be motivated to engage in regular physical activities. This will inevitably lead to a less healthy society and increased expenses in the public health system.
The impact of increasing VAT, by any percentage higher than the current rate, will have negative consequences both on the population and on the Sports, Health & Fitness industry and the entire Romanian economy, considering the following arguments:
- Violation of the right to health: According to the Charter of Fundamental Rights of the European Union, the right to health is guaranteed. Increasing VAT in the Sports & Fitness Industry could affect this fundamental right by discouraging citizens from participating in regular physical activities beneficial to health and by limiting accessibility to these services.
- Negative impact on the economy: The Sports, Health & Fitness Industry makes significant contributions to the economy through generating tax revenues, creating jobs, and stimulating consumption in related sectors. An increase in VAT will affect these positive aspects and lead to the inability to develop this emerging industry, which has faced economic difficulties in the past, such as the suspension of activities during the state of emergency and alert.
- Reduction in social contributions: In addition to VAT, the sports, health and fitness industry contributes to social security budget revenues through social contributions paid by employees and employers. A decrease in activity in this industry will lead to a decrease in these essential contributions to the social security system.
- Risk of having less investors both domestic and international. This year was a strong year bringing for the first time multiple international and domestic investors to focus on Romania.
The study conducted in 2022 regarding the impact of proposed measures to improve health in Romania reveals the consequences of optimum investments in the sports & fitness industry.
The study presents the short, medium, and long-term positive impact of two measures, one of which has already been implemented in Romania since February 2023, and its results will be visible:
- – Annual tax deductibility of employers’ expenses for fitness subscriptions granted to their employees, up to a maximum equivalent amount in lei of 400 Euro/year, following the model of voluntary health insurance;
- – Supporting the Health and Fitness Industry in Romania by initiating a scheme of grants/state aid for economic recovery and reduction of financial losses for economic agents in this industry caused during the Covid-19 pandemic.
The measure of deductibility of health and fitness memberships could generate an increase in state budget revenues from the profit tax generated by the health and fitness market in Romania and its adjacent markets, amounting to approximately 258 million EUR over the next 10 years. For the same period, an increase in state budget revenues from VAT collections of 53 million EUR could be generated.
All the positive effects revealed in the study would be canceled as a result of an increase in VAT in the sports & fitness industry.
Furthermore, an increase in the VAT rate would have a negative effect on the operational capacity of companies in this industry, both small and medium-sized enterprises, as well as large companies, which would face even more serious difficulties in conducting their current activities (including the permanent cessation of activities for some operators). These negative consequences will have a chain effect and will indirectly influence the decrease in state budget revenues, while simultaneously increasing the unemployment rate in Romania.
We urge the authorities to consider all these extremely important arguments before making a decision regarding the modification of the VAT rate for the Sports, Health and Fitness Industry. We are open to dialogue and willing to contribute constructive solutions that ensure the sustainable functioning of our industry and encourage citizens to maintain a healthy lifestyle.
A healthy and active nation means a healthy economy. The essential role of regular physical exercise in preventing and treating the most common chronic conditions is recognized and promoted by the World Health Organization. Maintaining the current VAT rates provides the Sports & Fitness industry, an industry that is vital for the health of Romanians, the opportunity to develop and have an increasingly powerful positive impact on the population and the Romanian economy.
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