The Fiscal Council, the independent fiscal think tank, estimates that tax evasion in Romania stood at 13.8 percent of GDP last year, down from a record high of 15 percent in 2010, amounting to roughly RON 81 billion (EUR 18 billion).
Around 60 percent of the tax evasion was generated by VAT fraud which came down to 8.3 percent last year, after posting a record of 9.4 percent in 2010, when Romania hiked the VAT by 5 percentage points to 24 percent.
“If Romania would collect the maximum amount of taxes, its budget revenues would be above the EU average as share in GDP,” said the think tank in a statement.
Romania collected taxes worth 33.5 percent of GDP last year, which is 11.9 percent below the EU average. Nonetheless, the government has rolled out a 5-year reform program aimed at overhauling ANAF, the tax agency. Authorities secured the largest share of the funding through a World Bank loan worth EUR 70 million.
Romania tax compliance slightly increased to 64.3 percent last year, from a 12-year low in 2010.
The labor market has also contributed to tax evasion, as around 1.45 million workers in Romania didn’t have proper papers. The social security contributions for this workers generated 24 percent of the overall tax evasion.
Tax evasion in the tobacco industry slightly fell to RON 1.3 billion (EUR 291 million), accounting for 13.3 percent of the overall market. Excises evasion in alcohol fell to RON 863 million (EUR 193 million), accounting for 45.7 percent of the market.