Foreign Investors Council: Investments require stability and predictability of the fiscal framework

The Foreign Investors Council (FIC) supports the need to reform the fiscal system, but it has to be analyzed in terms of medium and long-term sustainability and through prior consultation with the business environment, a release shows.

Europe is facing a difficult macroeconomic context that has slowed the economies of several countries, and others have even contracted in the first half of the year, as is the case in Germany or the Netherlands, important trading partners of Romania, but also of other SEE states such as Poland, Hungary, and the Czech Republic.

The slowdown of the economy at the European level is also reflected in the latest data submitted by the National Bank of Romania (NBR) on FDI which shows that foreign direct investments in Romania have decreased by 13% in the first half of 2023 compared to 2022. The stability and predictability of the fiscal framework are vital criteria for private investments, as it results from the periodic analysis of the FIC on the perception of large investors in the Romanian economy.

In this macroeconomic context, it is necessary for the Government to implement sustainable measures for the budget and the economy, aimed at ensuring fiscal equity, improving collection, adjusting imbalances, reducing the shadow economy, and stimulating private investments which is a solution to stabilize and constantly grow the economy. At the same time, those measures that can lead to the economy being blocked by discouraging investments or burdening citizens with hyperinflation must be avoided. FIC reiterates the need for Romania to have a holistic approach to the fiscal framework, fiscal-budgetary policies, tax administration, and wage policies.

The business environment is the engine of the economy and the main contributor to the state budget, we thus believe that all decisions with economic and fiscal impact should be taken through consultation with the private environment and based on studies and analysis that can estimate the impact in the short and long term. The turnover tax option that has been recently addressed can generate economic problems of transparency, companies being treated differently depending on their structure. Such a tax creates unequal conditions of competition among competitive producers of similar goods. Also, such a minimum tax established in relation to turnover would also infringe on the principle of contributory capacity and cannot be considered, in any way, as ensuring the proportionality and reasonableness of the tax burden. The large investors point out that the introduction of taxation of a percentage of turnover can lead to the slowdown or even contraction of Romania’s economy, impacting the state budget on medium-long term and at the same time, can jeopardize the country’s competitiveness in attracting new investment compared with other states.

FIC members remain at the Government’s disposal for consultations on strategic directions for strengthening the tax system and ensuring predictability as a central element for stimulating investment in Romania. Consultation with the private environment can lead to the identification of the most optimal solutions for the state budget and the real economy.