Insufficient training and fiscal unpredictability challenge businesses; seeking effective training and stable fiscal policies is key

The rules governing the business environment worldwide are increasingly complex, and although many aim to simplify relationships between involved entities, improve financial performance, better work conditions for employees, and ultimately raise the living standard for the entire population, their implementation is often challenging. In Romania, this complexity is compounded by frequent changes in economic regulations, especially those concerning taxation. For these reasons, companies operating in the local market must pay close attention to changes in their field, attract, develop, and retain specialized employees, with whose help they can successfully and timely implement these changes.

Opinion piece by Maria Butcu, Director of Outsourced Service Solutions, Deloitte Romania

According to a study published by the World Bank at the end of last year – Private Sector Diagnostic: Romania -, inadequate workforce education is the main constraint in the business environment, mentioned by the surveyed companies. Factors contributing to this situation, according to the study, include deficiencies in the educational system, unfavorable attitudes towards lifelong learning, as well as ineffective vocational training policies and other labor market policies, compounded by brain drain. Romania has the lowest score in the EU regarding the human capital index and the lowest rate of participation in lifelong learning. Moreover, World Bank representatives also highlight the low level of financial education, including among employees of private sector companies.

The report also contains a series of recommendations to remedy these deficiencies, aimed at ensuring access for all citizens to quality education, strengthening lifelong skills development, and improving workplace training.

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The second major constraint of the business environment is the lack of predictability, in which case the international institution recommends mitigating the impact of political instability and ensuring fiscal sustainability. Indeed, the companies analyzed in the report state that they allocate increasingly more human resources in the process of implementing tax regulations.

Speed of reaction, essential for successful implementation of new regulations Legislative instability and lack of predictability in the fiscal domain have long been major concerns for companies in Romania, and 2024 is no exception, considering the large number of regulations that came into effect at the end of 2023 or from January 1st this year. This includes the new taxation system for large companies, the micro-enterprise regime, different VAT rates applicable to certain product categories or transactions, complex reporting systems, new income taxation rules, etc. To these are added European directives that are transposed into Romanian legislation (for example, the one concerning the global minimum profit tax, applicable to multinational companies), as well as specific regulations from other sectors, such as finance, energy, environmental protection, etc.

These changes must be reflected in the financial-accounting systems of economic entities, often in record time, in the case of those adopted urgently and with immediate applicability, so that the company’s activity can continue at normal parameters.

To successfully and timely implement all these changes (so as not to risk sanctions from the authorities or disruptions in relationships with business partners), companies must allocate significant resources for this purpose, especially human, for which they must ensure a continuous training process, considering the slow pace of adaptation of the educational system to the needs of the labor market and the speed with which the rules in the economy change.

Beyond these organizational aspects, the focus on continuous improvement of employees also has other benefits for companies, including higher retention rates and greater involvement in daily activities, but especially in the business’s future projects. Thus, staff turnover decreases and company efficiency increases.