AmCham urges Romania’s Govt. to comply with fiscal consolidation targets

Romania should carry out a set of structural reforms (rather gradual and incremental than radical) aimed at pursuing a fiscal consolidation trajectory that would lead the country out of the excessive deficit situation where it is now – or else the country faces budget and current account issues, AmCham argues in a statement addressing the current ambiguity demonstrated by the executive and the ruling coalition.

“Compliance with the fiscal-budgetary consolidation commitment is a precondition for restoring the macroeconomic balance, particularly since Romania is under pressure to correct the excessive budget deficit,” the statement stresses.

The cost of not doing so will be high, although it is partly an opportunity cost (lost opportunities): losing precious financing under the Resilience Facility and paying high financing costs, AmCham warns.

The recommendations outlined by the association of investors are, as expected, pro-business oriented and rather gradual in their nature (“structural reforms”), conveying the idea that a targeted approach in the same areas as those discussed in the past with the IFIs would bring Romania’s economy back to sustainable tracks.

The recommendations include increasing the collection rate, a “modern” approach to transfer pricing, eliminating tax optimisation mechanisms and broadening the taxable base.

But the recommendations remain at a rather high level of granularity.

For instance, a World Bank report drafted for the government and leaked into the media goes beyond this level and speaks of cutting the tax breaks for IT, construction and agriculture and even progressive taxation (a recommendation far from the gradual approach implied by AmCham). In contrast, AmCham speaks of “gradually revising the various exceptions/ preferential treatments, considering both fiscal and economic interest” – a formulation that might imply that some tax breaks might support economic interest.

(Photo source: Facebook/AmCham Romania)