Gratuity charge, added to the bill

Starting January 1st, 2023, a new law regulates the taxation of informal payments made by customers for various services.

Christine Leșcu, 25.01.2023, 12:18

Starting January 1st, 2023, a new law regulates the taxation of informal payments made by customers for various services. The best known of them is the gratuity paid at a restaurant, generally known as tip. As of January 1st, the state has been charging 10% of the value of the tip paid at the restaurant and included on the bill. In terms of procedure, before being issued, the bill is given to the customer, who decides on the tip value, either as percentage, or in fixed amount. The customer also has the option to not leave a tip at all. Before the law was enforced, the decision to legalize the tip stirred heated debates. On the one hand, customers feared this could force them to offer a tip even if they did not want to, while service providers thought that, following taxation, they would be left with a much smaller tip.

Nevertheless, business operators in the hospitality industry believe that this law will only have positive effects for everybody, as Dragos Anastasiu, a spokesman for the Alliance for Tourism, said: I only want to point out that tip is not compulsory, but optional. It has been, is and will continue to be an action of any customer who is satisfied with the services received and wants to show it by offering a tip. Why is this law helpful? Because it regulates a habit and because it is a necessary thing, given that over 50% of the customers going to restaurants and hotels use credit cards and over 50% of them want to also pay the tip with the credit card. By regulating the tip, more than 90% of it goes to the staff, as compared with only 40% before.

Before the tip was included on the bill, some employers used to keep tips for themselves, and not give it to staff. Ioan Biris, a restaurant owner and head of the Employers Organization of Hotels and Restaurants in Romania, hails the decision to regulate informal payments: The winners as far as this law is concerned are the employees. At present, the relationship between us and our employees is transparent. Our industry has been criticized, for a long time, for the small salaries it pays. In effect, the revenues of workers in the industry are mostly covered, alongside salaries, by these tips. Everybody knew that already. Not being a legal issue, it was difficult to promote and measure. Only now things are as they should be. When young people want to make a career in the field, they have the chance to accurately calculate their revenues. This will probably make the number of young people choosing to work in this industry go up.

In financial terms, the positive effects of this measure were obvious shortly after January 1st. In the first week since the law was enforced, 50% of the tip was paid with the credit card, so in a manner that was very easy to register and tax. There are also advantages for industry workers who offer accommodation, not only for restaurants. Among the payments received by hotels, tips only represent 3% to 5% of the total. Calin Ile, head of the Hotel Industry Federation in Romania, explains: This law, through its form and fiscal deduction, gives company owners and decision makers the chance to support the activity of the accommodation units they use. We, for example, have many customers among the companies that organize team building sessions or have business delegates. Consequently, in the hotel industry, the amount allocated as tip for the employees will be much bigger. Another important thing that we expect to happen is to have service quality increased, so a bigger connection between the work deployed by the employees and the reward they get for it. Tip is optional and will be offered only if the customer is satisfied with the service provided. As customers, we will have the opportunity to reward those who work better and, as service providers, we will do an as good a job as possible, because it is closely linked with the pay we get.

Moreover, the measure to regulate tips will discourage those who want to unfairly take the money. Calin Ile: As regards the issue that some hospitality industry employees brought to the attention, namely, that there will be employers who do not give the tip to the employees, I want to tell you that this is illegal. This is illegal and employees who find themselves in this situation can make complaints at the fiscal authorities. We cannot let this law to be prejudiced by some employers who do not respect it. I am confident that most of them will distribute to staff all amounts resulted from tips, in keeping with the law.

Employers in the hospitality industry hope this law will attract more labor force to a sector that badly needs it. (EE)