In 2023, there were 219 legislative changes that had a direct impact on businesses. In 2024, by the end of July, there have already been 124 tax changes, according to an analysis which also shows that frequent legislative changes and tax increases have led Romanian SME entrepreneurs to postpone investments in business development.
“The business environment in Romania is deeply affected and destabilized by frequent tax changes, tax increases, and the application of laws even overnight, as has happened in the past almost two years,” states the business platform NextUp, Thursday, in an analysis sent to StartupCafe.ro.
The company states that laws are enforced before they are understood, because “the general direction of state institutions in relation to the taxpayer is to catch them in fraud.”
Moreover, due to legislative unpredictability, which increasingly affects small and medium-sized businesses, more and more entrepreneurs are postponing or completely halting investments in business development, the company claims.
“In recent years, but especially in the last 18 months, numerous changes have been made in Romania regarding the fiscal regime for companies, both with tax increases, as well as the introduction of more taxes and the elimination of certain tax benefits. Legislative instability is at an unprecedented level in Romania – not only are tax changes extremely frequent, but many take effect in a very short time, in a few weeks, a few days, or even overnight. The impact on a company’s budget is sometimes direct, immediately significant,” the analysis states.
The company that deals with business process automation highlights that tax changes are numerous, although the main ones that have generated “total chaos” have been the changes brought by e-Invoicing and e-VAT.
“Specifically, in 2023 there were 219 legislative changes with a direct impact on companies, and in 2024, by the end of July, there are 124 tax changes, according to the laws published online by ANAF,” the company states.
Roxana Epure, Managing Partner at NextUp, analyzed the impact of tax changes on entrepreneurs in Romania:
“Many of these changes take effect in record time, even overnight, and without clear and documented application norms. Communication from state institutions is poor, not transparent at all, and the entrepreneur leaves the responsibility of applying the law correctly to the accountant. State digitalization over the past year has meant more stress and manual work for accountants, which software cannot always take over – for example, those explanatory VAT notes that accountants will have to prepare by hand. Frequent changes that impact the company’s budget mean waiting. We wait to see what we have to pay, so we know how much we can invest, to extend our resources accordingly. This is why, in this context, many companies are no longer making business investments and, as a result, either barely survive or postpone growth. Moreover, in the business environment, we are experiencing an atmosphere of uncertainty caused by the lack of predictability created by officials. Entrepreneurs are eager to make investments, including in digitalization and automating operations through the use of a suitable ERP software, in team development, and in opening new branches or other forms of expansion. However, due to the new fiscal regulations that have removed certain facilities and increased certain taxes, companies are forced to take drastic cost-cutting and development measures, which ultimately means even less money in the state budget. From our point of view, these sudden changes in direction, taxes, do not benefit the business environment at all, because entrepreneurs do not know what to expect and live in total unpredictability.”
Some companies risk going bankrupt due to these tax changes
Legislative instability affects SMEs the most, many being impacted by tax changes and, consequently, struggling to return to past profitability levels, add the representatives of NextUp, who implement any tax change in software used by thousands of companies in Romania. Not surprisingly, small businesses are the most affected. As a result, in just the first four months of the year, over 32,000 companies closed down, 44% more than in 2023, according to data from the National Trade Register Office. The companies that were dissolved are from various sectors, including wholesale and retail trade, repair of motor vehicles and motorcycles, agriculture, forestry and fishing, information and communication, professional, scientific and technical activities, or construction, meaning that tax changes have general repercussions, not just in particular cases.
“We can talk about legislative unpredictability and instability in Romania at present, and this makes planning and business development difficult, both for large companies and small entrepreneurs. Many entrepreneurs prefer to remain cautious, being forced to make decisions against business development, and indefinitely postpone investments. Unfortunately, this is the consequence of the lack of clarity regarding economic and fiscal policies. Transparency from the state is essential to stimulate investor and business confidence. Because yes, the tax changes, as they are implemented now, can lead to an increased risk of bankruptcy among many companies,” adds Roxana Epure.
How can authorities help companies?
NextUp, a provider that implements legal changes in ERP, management, and accounting software for businesses, hopes for a collaborative attitude from the state towards the private sector and calls on authorities to implement legislative changes in a fair way for both parties.
“The business environment expects greater stability and transparency in economic decisions from the government, so that companies can plan and invest in the future with confidence. Without these elements, the economy risks facing an investment stagnation and increased difficulties for businesses, especially for small ones, which are already vulnerable. By providing software in which we must timely implement each tax change, so that companies can operate without interruptions and without risking sanctions, we know what businesses want from the authorities: to give taxpayers more time to adapt to new changes and tax increases for greater business predictability, to adopt a collaborative attitude, and to consult the business environment in the fiscal process. Lastly, to ensure they have a functional digital infrastructure for companies to comply with tax changes, such as in the case of e-Invoicing or SAF-T. Entrepreneurs, accountants, and employees in Romania want a change in the approach of state institutions in decision-making, so that we can all continue to pay taxes and contribute to Romania’s development,” concludes Roxana Epure.
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