Business warns: tax tightening leads to economic stagnation

The rigid approach of tightening the fiscal environment is the worst option the Government can take at the moment, said yesterday the participants at the press conference "What are we doing with the Romanian economy?", organized by the Association for Economic and Social Studies and Forecasts, in partnership with the Chamber of Commerce and Industry of Romania (CCIR) and the Romanian Employers' Confederation.

During the event, Mihai Daraban, the president of the CCIR, stated that Romania is facing economic stagnation despite the fact that on August 1, 2024, an additional 20,000 balance sheet depositors appeared, compared to 2023, and that the business environment no longer has the capacity to pay additional taxes and fees.

"I would take the state out of the equation when we talk about the economy, because out of the 866,601 balance sheet depositors on August 1 last year, there are still 1,480 economic agents with 100% state capital and if you want, with your will, up to 1,637 companies where the state has over 50% participation. So basically we are talking about a quasi-private business environment, which we notice has stagnated. It stagnated economically despite the fact that there was a spectacular economic growth in 2023, because we were coming after the pandemic. There was a 102 billion euro increase in turnover, and of course, a profit of 54.6 billion euros. Here is how in 2024, the same period, although there are 866,601, with 20,000 more depositors, the turnover decreased to 490 billion euros and of course the gross profit to 51.17 billion euros. Our observation is that the capacity of the business environment to pay additional taxes has been somewhat exhausted; more cannot be done. There were no spectacular inflows of direct investment in Romania, because we are no longer attractive", stated Mihai Daraban.

The President of the CCIR stated that when the Government introduced the 1% tax on turnover over 50 million euros, 1,042 commercial companies were targeted, which had a total turnover of 246 billion euros, and in about six months after implementation, the number of targeted companies decreased to 1,017 and the total turnover became 233 billion euros.

Mihai Daraban said: "The state should choose other targets, because the business environment is, if you will, a living organism that eventually gets used to the poison and will find antibodies. The state should not enter this game of attrition because it has enough targets among active companies that do not submit their balance sheets to the Trade Register".

In his opinion, the Government should carry out an administrative-territorial reorganization to reduce state expenses, so that we have a comfortable budget from which to offer tax incentives to investments that we need.

Regarding the measures taken by the Government through the small train ordinance, Adrian Izvoranu, vice president of the Romanian Employers' Confederation said that, "if it wants money, the Minister of Finance must relax fiscal policies and not tighten them".

"It must diversify and increase its collection base. They must have somewhere to collect, they must computerize and bring their collection apparatus to a performance level. And that's about it," said Adrian Izvoranu, who noted that employers are against an increase in taxation and value added tax.

"Increasing VAT and, in general, increasing taxes and duties is a stupid measure, the worst that can be taken and will never bring in extra money. I assure you of that now," said Adrian Izvoranu.

We recall that at the end of last year the Government approved an emergency ordinance regarding some fiscal-budgetary measures in the field of public spending, for the substantiation of the general consolidated budget for 2025, for the modification and completion of some normative acts, as well as for the extension of some deadlines. Among the measures provided for in the ordinance are the freezing, at the level of November 2024, of the salaries of employees in the budgetary system, of bonuses, food allowance and child allowance, maintaining the reference point, an essential element in the calculation of pensions, at the level of 81 lei, reducing the subsidy allocated to political parties by 25% compared to the level granted in 2024 and not updating service pensions with the inflation rate. At the same time, the ordinance also provides for the increase in the tax rate from 8% to 10% for dividends distributed starting with January 1, 2025, the reduction of the tax threshold for micro-enterprises from 500,000 euros to 250,000 euros, including during the fiscal year, and starting with January 1, 2026 to 100,000 euros, the elimination of the condition of generating income from consultancy and management, in a proportion of 80%, used for classification in the micro-enterprise category, the elimination of the scale facilities granted to individuals who generate income from salaries and similar salaries, as a result of carrying out the activity of creating computer programs or from employers in the construction, agricultural and food industry sectors under the conditions established by the Fiscal Code, starting with the income related to January 2025.