Tax administration, corruption and increased political instability are the most severe obstacles to doing business in Romania, according to new analysis by the European Bank for Reconstruction and Development (EBRD).

The EBRD and World Bank conducted the fifth round of their Business Environment and Enterprise Performance Survey (BEEPS) in 2013 and 2014, in 29 countries in Central and Easter Europe and Central Asia.

Tax administration emerged as the most severe obstacle in Romania. An estimated 18% of senior management’s time was spent on dealing with tax regulations, a 6 percentage points increase compared with the previous edition of the study, and above the south-eastern Europe (SEE) average of 14.3%.

Untaxed, undeclared activity amounts to more than 28% of national output, which puts Romania second only to Bulgaria in the EU for the size of the shadow economy as a proportion of GDP. The managers acknowledged, however, that Romania made some progress by reducing the tax payment frequency from quarterly to twice a year and introducing an electronic system for filing and paying taxes.

Corruption also remained a serious problem in Romania, despite significant improvements in all corruption related indicators, the survey shows. The percentage of Romanian firms that said they were asked for informal payments for construction-related permits, or in meetings with tax officials was lower than the SEE average but above the average of fellow EU members in central Europe and the Baltic states.

Political stability increased after 2012, when the Social Democratic Party (PSD) won both municipal and general elections, obtaining a strong majority of seats in the parliament, but was adversely affected by difficulties between the prime minister and the then president, which culminated in 2013 in the failed attempt to impeach the latter, according to the report.

Read more about the EBRD survey here.

editor@romania-insider.com