In this paper is presented a case study realized on an enterprise which has debts to the state budget. The scope of this paper is to show how the State is able to collect its finances from the economic agents more efficient and the economic agents have the possibility to pay off their debts using an effective system, established according to everyone’s needs based on a set of criteria’sfinances, state budget, facilities, exemptions

Nicoleta Barbuta Misu

English

Research Papers in Economics

THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
This paper was recommended for publication by Prof. Radu STROE, PhD 
 
 
 
THE RECOVERING OF THE 
FINANCES BY THE STATE BUDGET 
 
Nicoleta BARBUTA-MISU 
  
“Dunarea de Jos” University, Galati 
misunicoleta@yahoo.com  
                 
In this paper is presented a case study realized on an enterprise which has debts 
to the state budget. The scope of this paper is to show how the State is able to 
collect its finances from the economic agents more efficient and the economic 
agents have the possibility to pay off their debts using an effective system, 
established according to everyone’s needs based on a set of criteria’s. 
 
Keywords: finances, state budget, facilities, exemptions.   
 
 
1.  Introduction 
In Romanian economy, the fiscal system’s 
role is to ensure the financing of the public 
economy by tax collecting beside other 
means which allow the government 
intervention regarding the national economy 
in order to correct some negative fluctuation 
of the economic cycle. The fiscal resources 
are formed by and administrated through the 
state budget, the local budgets, the special 
funds budgets, the state treasury budget and 
the other autonomic public institutions 
budgets. All these represent the main source 
to finance the government and to allow its 
direct intervention on the market by 
subsidies, investments, and indirect 
intervention through the total amount of 
allocations result from the real economy. 
 
2.  Information 
The taxes that are collected from the legal 
persons for the Governmental State Budget 
are: the profit tax, income tax, dividend tax, 
value-added tax, excises, customs duties, the 
payments made by the natural and/or legal 
persons for the services executed in their 
behalf by certain public institution. Besides 
these rates and taxes one might mention: the 
tax for using the state owned lands for other 
purposes than agriculture or sylviculture; the 
tax on the buildings owned by legal persons; 
the tax on lands occupied by buildings and 
other constructions owned by legal persons, 
the tax on means of transportation possessed 
by economic agents; the tax on advertising 
media. The fines supported by the companies 
and the increase in taxes owed for not paying 
the duties in the specified time limit are 
attached to the taxation debts. Due to the 
multitude and complexity of duties and taxes, 
a large number of economic agents are facing 
difficulties in their attempt to be “good 
taxpayers”. In this situation is also 
“MODEXIM” Ltd., which took form by 
reorganizing (from a public owned company 
to a joint stock company) in 1991 (according 
to the 15
th /1990 Law and 31
st /1990 Law). 
The opening capital was 6.834 euro, entirely 
subscribed by the Romanian State as single 
shareholder. Nowadays, the company’s 
organized as a joint stock company, which 
were private capital and its registered share 
capital riches, the amount of 205.022 euro.  
 
3.  The Company Evolution in 2005 
Regarding 2004 
The Company assets registered a rising of 
1.118.186 euro due to real assets revaluation 
(977.555 euro) and due to the paying off of 
same debts that are due in less than one year 
(net current assets = 140.631 euro). The total 
assets value registered in 2005 is 2.201.417 
euro regarding 1.083.231 euro in 2004. 
(Table 1). 
 
Table 1. The owned capital evolution in 
2004-2005, EURO  
 
Owned capital  2004  2005 
Subscribed and 
paid-up capital 
203.209 203.209 
Revaluation 
reserves 
422.675 1.421.073 
Reserve 457.347  577.135 
Total value  1.083.231 2.201.417 
 
In 2005, the company’s debts were about 
238.013 euro (Table 2), being diminished 
with 222.640 euro than the debts in 2004 as a 
result of the paying off of the tax liabilities, THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
  72 
the contractors debts and also as a result of 
the exemption according the 40/2002 
Ordinance. The main rates have registered 
the following values: 
1.  Gearing ratio = borrowed capital/ owned 
capital = 2.13% (3.87% in 2004): it 
shows the proportion between its owed 
funds and the borrowed ones. The 
decreasing of this ratio indicates an 
increase in the owned capital. 
 
2.  General solvability= owned capital/ 
permanent capital = 90.2% (70.16% in 
2004): shows the company’s ability of 
covering its payable liabilities. 
3.  Speed of turnover = turnover/ stocks (on 
hand) = 1.2 - 312 days (1.3 – 280 days in 
2004) the decreasing of 32 days is caused 
by the climb down of company’s activity 
volume. 
 
4.  Profit rate  = gross profit/ turnover = 
17.06% (11.73% in 2004). 
 
Regarding the incomes, expenditures and the 
operation outcomes  it is registered a 
decreasing by the 2004 results. 
 
 
Table 2. The “MODEXIM” Ltd. debts structure on 31
st December 2005 
  
Debts  Values 
(euro)  Debts  Values 
(euro) 
Salaries   9.074 Dividends  63.229 
Social Insurance, Health 
Insurance, Unemployment 
Fund 
10.426
Increase in tax (regarding the 
Health Insurance) 
675 
Profit tax  106 Creditors  285 
Salary tax  2.794 Contractors   100.952 
Value-added tax  2.936 Banking loans and payable interest  47.075 
Special funds  460 Total value  238.013 
      
The operation outcome is 87.513 euro (a 
74.469 euro decreasing) as a consequence of 
the climb down of the sales with 218.894 
euro of the extraordinary incomes have 
increased reaching 125.330 euro, caused by 
the execution of the increase in taxes and 
penalties for overdue from 2002 until 2005. 
The profit tax, reaching 24.323 euro is lower 
than the one in 2004 by 10.560 euro. 
 
4.  The Company Evolution in the First 
Trimester of 2006 
The turnover is under expectations being 
lower than the one in the first trimester of 
2005 (325.005 euro vs. 514.955 euro 2005) 
and the company has less finances than 
necessary to pay off all the period 
expenditures. Due to the increase in 
establishment charges  (duties, taxes, 
depreciation fund), the operation outcome is 
negative (- 15830 euro).  
The owned capitals reach the value of 
2.183.274 euro mainly because of the 
positive revaluating differences. The 
liabilities towards contractors have a lower 
value (79.636 euro) and the stocks value is 
855.836 euro (891.503 euro in 2005). The 
other liabilities are in due date. But the 
company has dividend and dividend tax back 
debts that reach the value of 22.686 euro. It is 
noticed that “MODEXIM” Ltd., even if has 
several loses, is in a balance state and for the 
future has planed to obtain profit and not to 
have back liabilities towards the state. This is 
the actual state of “MODEXIM” Ltd., but 
until 2005 it had to struggle to get out of 
difficult situation. The company had several 
back debts towards state budget, the Social 
Insurance Budget, The Health Insurance 
Budget, Special Funds, so on 30
th of June 
2005 these debts reached 119.195 euro 
(Table 3).   
 
Table 3. The of the company’s debts: 
                                                                                                           - EURO - 
Owed liabilities  Owed on 
30.06.2005 
Paid off 
01.07.2005-
05.08.2005 
Balance
Dividend tax  716 218  498
Profit increase in tax and penalties proposed for exemption  9.592   9.592
VAT Increase in tax and penalties proposed to be exempt  81.474   81.474
Dividend Increase in tax and penalties proposed to be exempt 310   310THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
  73
Owed liabilities  Owed on 
30.06.2005 
Paid off 
01.07.2005-
05.08.2005 
Balance
Unemployment Fund Increase in  99   99
Salary Increase in tax and penalties proposed to be exempt  10   10
Education and Inability  Funds Increase in proposed to be 
exempt  3 3
 
From 1
st July  until 5
th August 2005 the 
Company paid off 27.806 euro the difference 
of 91.388 euro being exempt. If the 
exemption had granted would ask for a 
banking loan considering its rather good 
situation. 
 
5.  State facilities 
For the companies confronted with difficult 
situation regarding the debts for state budget 
the Romanian legislation approved an Urgent 
Ordinance (40/2002) according to which, the 
state propose the economic agents several 
attractive solutions to recuperate its claims. 
The back payments owed to the budget have 
severe economic and social implications, 
which affect the entire society. Their 
unsettlement and continuous accumulation 
also the matching increase in tax and 
penalties affects even more the budgets and 
as a result of this situation, the Urgent 
Government Ordinance (40/2002) regarding 
the budget arrears recuperation might be the 
proper solution for this problem.  
The state established for the tax liabilities 
represented by duties, taxes, rates and other 
state back finances including matching 
increase in tax and penalties for overdue 
spread out payments, postponements, tax 
exemptions (free from taxation) or reductions 
of payments, as law provides. All this is 
licensed based on the debits justified petition 
no matter the property forms and the 
organizing method. The legal regulation is 
meant to help the economic agents through 
these facilities and also by stopping or by not 
beginning the debtor’s enforcement that 
benefit from facilities. 
 
In order to benefit of these facilities, the 
economic agent must hand in an application 
and the documents required by law to the 
taxation entity where he is registered as 
taxpayer. This fiscal unit must keep a 
separate register for the application of the 
legal person and one for the applications of 
natural persons. The analysis that determines 
whether the debtors receive any facilities or 
not is based on the applicants’ economic and 
financial performances and financial 
discipline criteria. In order to insure the fiscal 
organism’s objectivity, the criteria and its 
score are established by the Ordinance 
schedules. According to the criteria total 
points there is established the debtors 
facilities category and the ex-gratia payment 
term, spread out payments, the reductions 
percentage for the increase in back tax and 
for the penalties or their exemptions. The 
information used to determine the criteria’ 
percentage is taking from the latest balance-
sheet and from its schedules hand in by the 
debtors to the territorial fiscal unit, but the 
information is also collected from the 
application’s schedules. 
 
MODEXIM Ltd. showed interest in the 
offered facilities and having a total number of 
146 points (Table 4) the company handed in 
an application to General Direction of Public 
Finance asking for exempt the payment of the 
increase in taxes and penalties for overdue 
for the state liabilities until 31
st December 
2004, calculated until 7
th April 2005 reaching 
the value of 34.270.560 lei RON. In order to 
benefit of this exemption, the company paid 
off its state liabilities including those for the 
current year. 
 
Table 4. The economic and financial performances (yield) criteria 
 
Rates (Index, Indicators) Calculation  Points 
The taxpayer length of service  Over 10 years  10
The arrears length/ debts length  6 years/12 years  8
Registered office mobility  Stable office in the past 5 years  10
Changes in main shareholders evidence  None in the past years  10
Financial gearing   Total debts/ turnover = 19.02% (<30%)  10
Global liquidity   Floating assets/ total debts (working)<1 year = 
4.156 (>1)  10
Solvency (trust-worthiness)  Total assets/ total debts = 3.352 (>2)  10THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
  74 
Rates (Index, Indicators) Calculation  Points 
Number of returns on tax and other rates 
hand in during the past 24 months  24 15
(The liabilities balance noticed by the fiscal control/ return on tax hand in for that period)*100 
= 3,118% (<20%)  5
Existing arrears referring to stopping by 
source taxes  None   20
The existence of previous facilities   Yes, default   0
The taxpayer had stipulated by contract (relations) relationships with economic units financed 
by the state budget and it didn’t cashed in due time their counter value    10
The current years debts situation  More than 90% are paid off (settled)  20
The taxpayer had been penalized for 
fiscal evasion (tax)   No (it hadn’t)   10
(Total value of the payment facilities (turnover))*100 = 7.52% (<25%)  8
Total points  156
    
This table indicates a total of 156 points that 
is diminished by 10 points, obtaining a final 
total of 146 points. The Company’s 
application has been approved, been 
exempted the following increase in taxes and 
penalties (Tables 5 and 6): 
 
Table 5. Exempted increase in tax, EURO 
                                                                                                       
Increase in for overdue taxes Liabilities   1999 2000 2004  2005 Total 
Profit tax    5.542  2.102  1.556 9.200
VAT 33.467  35.704  12.241  81.41
2
Dividend tax    23  183  84 290
Salary duty     4  6  10
Education 
Fund     2  2
Risk (venture) 
Fund     1  1
Total   33.467  41.273  14.534  1.641 90.91
4
 
The general exemption is of 91.388 euro. 
This amount is not taxable and is considered 
an owned financing source for the company. 
This is a real advantage for company that 
compensates the effort made to pay off the 
liabilities for the state budget, including those 
for the current year in order to be granted the 
exemption. The exempted amount has been 
registered to the extraordinary incomes. 
 
Table 6. Exempted penalties 
- EURO - 
Penalties for 
overdue taxes  Liabilities 
2004 2005 
Total 
Profit tax  172 220  392 
VAT  62   62 
Dividend tax  3 17  20 
Total  237 237  474 
 
By setting the goal to pay in such a short 
term the debts, the companies had faced a 
huge risk. What would have happened if the 
society hadn’t been granted the exemption, 
but (would have been granted) a spread out 
payment?  In this case the company might 
have chosen a one-year spread out (according 
to the rapport between the total state 
liabilities and the turnover results, it may 
spread out its payments for 24 months). This 
method implies a security for debts in some 
of 27.806 euro. The spread out payments 
would be of 2.317 euro monthly, until the last 
month when the company might pay either 
2.317 euro or an increased by a proportion of 
the postponed payments sum. The payments 
of increase in for overdue taxes and penalties 
are postponed until the last due date and may 
be reduced or exempted according the law. 
This method implies the existence of a 
security for tax that increases the company’s 
costs. 
 
In conclusion, the best solution for the 
economic agents that are in impossibility to 
pay their debts is the obtaining the 
governmental facilities that is an advantage 
for the state budget which has recovered the 
finances.  
 
References: 
  Bistriceanu, Ghe. – Finance, Didactic 
and Pedagogic Publishing House, 
Bucharest, 1992; 
  Juravle, V., Tatu, L. - Fiscality applied in 
Economy, Rolcris, Bucharest, 2001; 
  Patrut, V. – Expert Accountant and 
Licensed Accountant Book, Agora, 
Bacau, 2002; 
  Toma, M., Alexandru, F. – Finances and 
Financial Administration of the 
Enterprises, 2
nd Edition, Economic, 
Bucharest, 2003; THE ANNALS OF "DUNÃREA DE JOS" UNIVERSITY OF GALAŢI        
FASCICLE I - 2006, Economics and Applied Informatics, Year XII, ISSN 1584-0409 
 
  75
  Vacarel, I. and others - Public Finance, 
2
nd Edition, Didactic and Pedagogic 
Publishing House, Bucharest, 1999
 

Didactic and Pedagogic Publishing House,

The Recovering of the Finances by the State Budget

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The Recovering of the Finances by the State Budget

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