Romania’s tax system “needs improving”

Romania’s tax system needs improving, given the low levels of tax collection in the GDP compared to the EU average. This is one of the finds made by foreign investors conducting business in our country.

They have proposed a series of steps to improve the business environment, among which: reducing social contributions, returning to the 19 percent VAT rate and adopting the holding law.

The members of the Foreign Investors Council say that the authorities have implemented 11 out of the 80 steps proposed by them for the revival of economic growth a year ago.
Some of these steps are: making labour laws more flexible, prioritising major public investments, expanding the “First Home” and “Jalopy” government programmes, managing arrears or creating crediting amenities for SMEs.

However, the council believes that there is still a lot to be done and recommends immediate action to make the judicial system more responsible, reduce tax evasion, liberalise the energy market, improve the absorption of European funds and focus on conducting investment projects in infrastructure by means of public-private partnerships.
Moreover, investors recommend reducing VAT to 19 percent, lowering the social insurance rate and exemption from the reinvested profit tax.

“Why do we say that we wish to return to the 19 percent VAT rate? For several reasons. First of all, state budget returns should not rely mainly on tax increase. What is more, the VAT rate increase took place overnight and the business environment had no way to prepare for it.

“Last but not least, we believe that making tax collection activities more efficient from the point of view of the National Agency for Fiscal Administration is preferable to increasing taxes, which is not beneficial at all in difficult times. Encouraging consumption is also very important for reducing the rate to 19 percent and that is what the business environment wishes, for these reasons”, Daniel Anghel, the treasurer of the Foreign Investors Council stated.

Corruption affects the business environment

The President of the Foreign Investors Council, Steven van Groningen, tackled the issue of corruption as well.

“How corrupt is Romania’s business environment? Fortunately, there are many international studies which answer that question, so I don’t have to. However, if you want me to give you an answer, it is too corrupt. It does not matter that other countries may be more corrupt, we must eliminate it entirely. And accomplishing that requires constant effort and, how shall I put it, zero tolerance”, Steven van Groningen stated.

He added that it was alarming that Romania was perceived as a country with high levels of corruption, which affected the perception of investors and of the external environment in general.

Nevertheless, the companies represented in the Foreign Investors Council have planned investments of ten billion Euros in Romania in the next five years.

Translated by: Roxana-Andreea Dragu

MA Student, MTTLC, Bucharest University