Opinion of Tănase Stamule, Economist: “The 1% turnover tax in the Ciolacu package is an anti-economic measure”
Author: Tănase Stamule
The insistence with which the Prime Minister, advised by the neocommunists around him, clings to the turnover tax must make us ponder about Romania’s economic future. The Ciolacu package risks becoming a millstone around our country’s neck.
No country in the European Union has a similar tax, nor do they have any intention of introducing one.
Criticism of large companies should be approached with caution to avoid impacting the jobs of Romanians.
When it comes to large companies, we should discuss two distinct categories.
The first category consists of companies whose market is Romania, and where the added value remains in the country. These companies primarily aim for profit in Romania, and it is natural to monitor them closely to ensure they pay taxes. These companies generally have a profit rate of over 6%, and the turnover tax is unlikely to hit them hard because they will pay regardless.
The second category of companies consists of those that produce in Romania for foreign markets. These are companies that produce various components, clothing, auto parts, etc. They have chosen Romania due to its proximity to Western Europe, the workforce, and predictable legislation. They do not sell their products in Romania, and the added value they create here is very low. Implicitly, these firms have profit margins between 0 and 3%, and their objective is not to make a profit but to optimize production costs for the final product.
These companies will be directly affected by the turnover tax, with many of them likely to incur losses. This will significantly reduce Romania’s attractiveness as an investment destination, and many firms may decide to move to neighboring countries with lower taxes.
Companies that primarily serve other markets employ over 1 million Romanians. Of course, one could argue that we are not concerned about the future of these individuals, and that animosity toward corporations is more politically important than the stability of their jobs.
Unfortunately, due to the poor advice received by the Prime Minister from neocommunist advisors, Romania risks embarking on an economic adventure whose outcome is uncertain.
While the Ciolacu package is necessary to address the budget crisis caused by Câciu’s deficit, great political care is needed to avoid severely and irreparably affecting the business environment.
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