Income tax shifts - Causes and effects on romanian enterprises

Author:Viorica Mirela Stefan-Duicu - Adrian Stefan-Duicu
Position:Teaching Assistant, 'Nicolae Titulescu' University, Bucharest - Economist, Bucharest
212 Lex ET Scientia. Economics Series
Viorica Mirela STEFAN-DUICU*
This paper aims to make a point in what the fiscal environment has been and is about in
Romania. In 2008, the crisis was obvious to our authorities, who before declared with
nonchalance that our system is way back from Europe’s and the crisis will pass near us. This
didn’t happened and here we are, in front of it. The financial crisis has reduced the state budget
incomes in a drastic manner, making the authorities to do what they knew better – put more fiscal
weight in taxpayer’s burden. In this paper we will approach the minimum income tax amount, tax
amount which has been the cap for more than 25% of the Romanian enterprises. The government
took the easy way, more tax, no analysis on what the side effects of this tax over the economy will
be on short-medium term. As you guessed, the only good that came from this measure was more
money at the budget, but only for a couple of months because, as previously said, 25% of the
enterprises closed their activity, meaning no more income tax payments, no more social and health
contributions, no more wages paid etc. The budget has got a big hole because now, beside the fact
that it didn’t cashed in from the closed enterprises, has to pay unemployment help for those who
worked in those firms. As the crisis goes deeper, the government removed at the end of 2010 the
minimum income tax amount, declaring with “drums and trumpets” that these measures are in
order to revive the economy and the enterprises activity. We shall see about that.
Keywords: SMe, income tax, level of taxation, Romanian legislation, global crisis.
After the communist regime has fallen, a sort of market economy has been installed. Since
then, a proper fiscal legislation has not been conceived. As Ovidiu Nicolescu (the vice-president of
the Worldwide SMes Organization) said: “ Sudden decline of economic and political institutions
of the old system, institutions that provided leadership through orders received from the center,
along with emergence of democratic political institutions has created an incompatibility
between various components of the socio-economic mechanism. The hybrid institutional and
economic system reform cannot be achieved only by corrections and by adjustments, it also
requires making some structural changes in its substance. This process should not be all owed to
run as a “natural” process, it must be based on decisions arising from a political will, materialized
through strategies and programs, meant to reduce the duration of the transition and to achiev e a
* Teaching Assistant, “Nicolae Titulescu” University, Bucharest, (email:
**Economist, Bucharest, (email:

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