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February 3, 2023
BUSINESS

Tax Council head: Market size, ease of starting business – Romania’s trump cards, taxation a downside

Romania has a number of competitive edges over the countries in the region, such as the size of the domestic market, the reduced number of days needed to start a business, the degree of protection for the investor, but there are some downsides as well, such as the motivation to work and invest, which are sapped by the high levels of taxation, Tax Council president Ionut Dumitru says.
‘In my opinion, Romania’s major trump card is the size of the domestic market. Romania and Poland are the largest markets in the region. So, when an investor makes a decision on whether to invest in Romania or Bulgaria, Romania is definitely the first option, from this perspective. Other elements that are to our advantage are for instance the reduced number of days required to open a business, the power of investor protection, the quality of mathematics and science education (whilst the overall quality of education is a drawback in Romania, although technical education still seems to be a plus), but also the width of the Internet connection,’ Ionut Dumitru told a specialist conference last Friday.
Another important asset of Romania’s is macroeconomic stability, a prerequisite for achieving economic growth, which is however not enough.
The negative aspects highlighted by Dumitru include the effects of taxation on the motivation to work and to invest, which are a serious disadvantage.
‘For example, by the motivation to work, our taxation regime places us on position 140 of 144 countries – a real catastrophe, while we are ranked 128th by the motivation to invest,’ said Ionut Dumitru.
In this context, he pointed out that although certain taxes are lower in Romania than in other countries, the overall level of taxation is very high. The Tax Council president also mentioned the poor road quality and the reduced capacity to retain talents in the country among the drawbacks.
In his opinion, infrastructure would be the first ‘button’ we should ‘press’ in order to improve competitiveness.
‘The other aspects that impede on us are education and primary health, which place us trailing behind other countries in the region in terms of competitiveness,’ he said.
In terms of taxation, Ionut Dumitru believes that the authorities should make efforts to reduce the VAT, as the current 24 percent rate is the third highest in the European Union, especially as regards tax collection, which places the actual level of the VAT at 11 percent. ‘More than half the VAT goes uncollected,’ Dumitru said.

 

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