Foreign investors grappling in Romania with rampant tax evasion

Foreign investors fear the government may have to increase the taxation burden for fair companies, to compensate the gap in revenues due to tax evasion, said Mihai Bogza, president of the Foreign Investors Council (FIC), during the first day of the Foreign Investors Summit (FIS), organized by Business Review magazine.

Bogza said investors have seen that in recent year the judiciary and the prosecutors “have started to do their job”, but warned this was just the “tip of the iceberg”.

“When I am talking about corruption I am not referring only to the public sector, but also to the private sector, because we are still seeing a high level of tax evasion that is perpetuated by certain companies in the private sector, with a major negative impact because it distorts competition,” said Bogza.

“The taxes that are not collected from these companies will eventually be collected through the increase of taxes for fair payers, which will see Romania, despite the progress registered in the recent period, including the reduction of social insurance contributions (CAS), to have an average taxation rate above the EU average,” said Bogza.

The FIC president also pointed out that investors are disappointed by the low absorption of EU funds and the slow development of infrastructure projects.

He added that the gap between education and the need of employers remains wide, explaining that vocational schools are the first step for meeting the demands of companies.

Bogza also referred to the wages of specialists in the public sector, pointing out that wages in some categories should go up without expanding the overall expenditure.

“I am talking about doctors, who are underpaid and have the alternative to leave the country or to receive money from patients. Furthermore, you see ministers paid with EUR 1,000 net each month, which is way below the pay of managers in the private sector, for a position that has a huge responsibility and a high volume of work,” said Bogza.

Romania’s tax evasion amounted to 16 percent of GDP in 2013, according to the Fiscal Council, an independent think-tank.