PwC Romania : Gov't envisaged measures translate into higher tax burden and competitiveness loss 

  The emergency fiscal measures taken to reduce the budget deficit in 2025 translate into a higher tax burden and a loss of Romania's competitiveness compared to other countries in its geographical region, said PwC Romania Tax Partner Ruxandra Tarlescu.'The emergency fiscal measures aimed at reducing the 2025 budget deficit result in a greater tax burden and a loss of Romania's competitiveness in comparison to other countries in our region. For a long time, low taxation, along with a well-trained workforce, were the main strengths of our country when compared with other investment destinations. Both advantages are now losing their significance, and Romania will have to find new incentives to remain attractive to investors and continue its economic growth and development. The maintenance of the 10% flat income tax rate is a positive aspect, but the overall labour taxation rate remains high due to social security contributions - 42.8% compared to 34.3% in Poland and 40-41% in Hungary, the Czech Republic, or Slovakia, for a single employee without dependents. The profit tax remains at 16%, whereas it is 9% in Hungary and 10% in Bulgaria. Meanwhile, the increase of the dividend tax to 16% represents a tripling over the past two years. In Hungary, this tax stands at 15%, and in Bulgaria at 5%. Additionally, the banking sector will owe a 4% tax, up from the current 2%, although a decrease to 1% had been scheduled for next year,' said Tarlescu.According to her, increases in VAT and excise duties will fuel inflation and negatively impact consumption, which will in turn affect companies' revenues. By raising the standard VAT rate from 19% to 21%, Romania moves to the middle of the EU ranking on standard rates. However, most EU member states apply at least one, two, or even three reduced VAT rates, lower than Romania's. By eliminating the 5% and 9% reduced rates and replacing them with a single 11% rate, Romania joins a small group of only three EU states with similar arrangements.'In conclusion, through these measures, Romania is following the trend of increasing taxation, climbing towards the EU average, even though it still has economic gaps to bridge. If this trend continues, the loss of fiscal attractiveness may be premature and could negatively impact the investment climate and conditions for economic growth,' Tarlescu added.On Thursday, the Ministry of Finance published a draft law proposing several fiscal-budgetary measures, including: raising the standard VAT rate from 19% to 21%, increasing reduced VAT rates from 5% and 9% to 11%, raising excise duties, increasing the dividend tax from 10% to 16%, and introducing an additional tax for banks. The draft also includes higher taxation in the gambling sector and introduces social security contributions on the portion of pensions exceeding 3,000 lei.