Foreign investors warn that turnover tax would negatively impact Romania's economy

The introduction of a turnover tax would have a negative impact on Romania's economy, warns the Foreign Investors Council (FIC) – an organization that represents the biggest foreign investors in the country.

"The introduction of taxation of a percentage of turnover can lead to the slowdown or even contraction of Romania's economy, impacting the state budget in the medium-long term and, at the same time, can jeopardize the country's competitiveness in attracting new investment compared with other states," FIC said in a press release issued on Monday, August 28.

FIC's statement comes after Romania's social democrat prime minister Marcel Ciolacu said last week that his Government would assume responsibility in the Parliament for a fiscal reform package aimed at lowering the country's budget deficit. Introducing a turnover tax targeted at large companies that report low profits or losses is one of the measures potentially included in this reform.

The two coalition parties – PSD and PNL – haven't officially stated their intentions as part of a public debate. The measures to be included in the fiscal reform have only been leaked to the press by various sources within these parties, stirring negative responses from the business sector.

"The business environment is the engine of the economy and the main contributor to the state budget. We thus believe that all decisions with economic and fiscal impact should be taken through consultation with the private environment and based on studies and analysis that can estimate the impact in the short and long term," FIC said while also pointing out to the difficult macroeconomic context in Europe.

"The turnover tax option that has been recently addressed can generate economic problems of transparency, companies being treated differently depending on their structure. Such a tax creates unequal conditions of competition among competitive producers of similar goods. Also, such a minimum tax established in relation to turnover would infringe on the principle of contributory capacity and cannot be considered, in any way, as ensuring the proportionality and reasonableness of the tax burden," the business organization explained.

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