Romania, champion in losses. How we miss every year to bring billions to the budget. Expert: “We don't all follow politicians' tricks”
Romania boasts of its achievements, but it is in many ways a counterexample in the European Union. In addition to the great poverty, the huge inflation and the enormous deficit, Romania is now also the last in terms of profit tax recovery.
Romania fails to bring the necessary money to the budget. PHOTO: Pexels
Romania is the undisputed European champion when it comes to the deficit and taxes, but also regarding the taxes and fees that ANAF fails to bring to the budget. But that's not all. According to European Commission data, Romania is also last when it comes to how it manages to collect the profit tax of companies operating in the country. The taxation expert Gabriel Biriș explains, in a post on Facebook, how we manage to get it right in this chapter as well.
“The European Commission has also published the first study on the GAP in the collection of profit tax (CIT). No surprise, in 2024 Romania is also the absolute “champion” here: 35%, compared to the average of 10.9% (pg. 4.5), still decreasing from 51% in 2019. The study is not as detailed and useful as the one on the VAT GAP, but – on pg 71 we find an extremely interesting graph (for the year 2019): Romania “reigns” at the top, with a GAP of 51% (more than half!), followed by Italy with 38%, Cyprus and Hungary with 37%. Of the 51%, only 7% comes from “profit shifting”, (transfer of profit through prices), the remaining 44% comes from non-compliance”.
says Gabriel Biriș.
Romanian companies are the most affected
He goes on to explain the underlying causes of this failure and where the big problems that lead to this GAP come from. The bad news is that the current legislation only directly hits entire sectors of Romania's economy. And as if that were not enough, the most affected by the current laws are Romanian companies.
“One-sixth of GAP comes from profit transfer. 5-sixths comes from non-compliance (non-declaration or declaration and non-payment). How come? Well, don't our politicians tell us that the big problem is profit transfer? Isn't that why they invented the IMCA, which harms entire sectors of the economy and mainly hits companies with Romanian capital? Problem! That's not where the problem comes from, and we don't all follow their “trick” either!”adds Biriș.
Finally, he also explains that the problem comes from the poor way in which the state recovers this money from the budget and draws a parallel with the bad situation of VAT collection.
“I have repeatedly said that the problem of profit shifting is greatly overestimated by some 'experts' who do not understand economics. The Commission's study confirms this! We have a similar distribution in VAT: a maximum of one fifth of the GAP comes from retail (B2C), the remaining 4 fifths come from B2B, B2G (i.e. high fraud), although most of the efforts have so far been focused on the first fifth”. concluded Gabriel Biriș.
Although Romania does not manage to bring the fees and taxes required by law to the budget, the Government of Romania has decided to increase them out of hand, in the hope that this way it will collect more money. In reality, more and more economists argue that future collections will be in the red, and tax evasion will increase as companies find the right methods to circumvent increasingly restrictive trade laws.
