Country Rankings - Romania
Jan 11, 2016 Romania: VAT reliefAlthough several Central and Eastern European nations carried the torch for flat taxes when they emerged from the shackles of communism, these days you'd be unlikely to see a Carson-style plan emerging from Europe. Indeed, the EU as an institution seems determined to tax Europe's economy out of existence. So well done Romania for implementing that most rare of measures these days, especially for a member state of the European Union: a value-added tax cut. And not an insubstantial one either, of 4 percent. I'm well aware that there is a trend taking place that is seeing tax shifted away from income and labor, and onto consumption, which seems to be a good thing. Even though consumption taxes tend to be regressive, a lot of economists agree that this tax shift will encourage economic growth and secure governments' tax bases. Yes, Romania has just bucked the trend, but that may be to its competitive advantage. Few countries in the EU now have standard rates of VAT of less than 20 percent, and many have pushed VAT rates well above that level. Most of the countries that have recently increased VAT did so in response to the calamitous effect the financial crisis had on national budgets. Now things have stabilized somewhat, few have shown much inclination to reduce VAT rates, except Romania. But maybe its decision to cut VAT will inspire other governments in the EU to follow suit. Or perhaps I really have just entered La-La Land.
Nov 06, 2014 Romania: stays flatLooking a relatively short distance to the north, the announcement by Romania's Prime Minister Victor Ponta that the country's 16 percent flat tax is here to stay - for the time being at least - was encouraging news for a country that has had its problems and remains under the watchful eye of the IMF. Romania's economic fortunes have see-sawed since the end of Communist rule in 1989. With its dilapidated state-run industries dominating an obsolete economy, the country initially struggled to adapt to a brave new world of market forces and globalization. A painful recession ensued in the late 1990s, before an investment-led recovery brought with it strong GDP growth in the noughties. However, corruption and red tape continued to permeate the business environment, and the global financial crisis hit the country hard, forcing Romania to sign on to a USD26bn emergency assistance package from the IMF, the European Union, and other international lenders. Usually, this means taxes go up, and Romania's flat tax would normally be considered something of an extravagance by the likes of the EU under these circumstances. Romania though, seems to have got away fairly lightly on the tax front, with the IMF pressuring the country to tighten up tax administration and crack down on evasion rather than increases taxes, or dream up new ones. One only has to look elsewhere in Europe to see the correlation between high taxation and low or no growth (France and Italy), and vice versa (Ireland). I'm skeptical that such reasoning figured in the IMF's analysis of the situation in Romania, but it should hopefully serve the country well in the longer-term, nevertheless. In an age when we are all seemingly expected to pay the maximum amount of tax the law tells us to, even though on many occasions the law is unclear, just where the line exists between "aggressive" (unacceptable) and "unaggressive" (acceptable) tax avoidance has yet to be resolved, and indeed could be drawn differently depending on which country is being looked at, and the government of the day. But governments are also stretching legal boundaries at the moment, not only in their desperation to get us to pay more tax, but also to encourage us to behave like perfect children - er, I mean citizens - by following all the rules and not giving Nanny any trouble. As a light-hearted digression, I was amused to read a few years ago about how municipalities in the UK were allegedly using surveillance laws intended to catch terrorists for all manner of trivial offences, if you can even classify them as offences in the first place. Examples included the family spied on to see whether they were lying about where they lived, a trick supposedly used to get their children into the state school of their choice, and the case of the "Dustbin Stasi," when another municipality used the legislation to crack down on those awful bourgeois reactionaries who take a cavalier attitude to sorting regular trash from recyclables (plastic in the garden waste? You're nicked mate!).
Apr 18, 2013 Romania: mistreat ChinaOne country which is conspicuous by its absence from the TPP talks is of course China. Although there are ongoing negotiations between the Middle Kingdom and various other countries, and China has FTAs with a scattering of other countries, notably including ASEAN and New Zealand, on the whole it is lagging. And it considers itself as an injured party in trade affairs, complaining this week about the level of "dumping" and "counter-vailing" measures it is subject to, particular emanating from the USA. A lot of the problem revolves around the designation of China as a "non-market economy" (NME). For anyone who, like me, finds it extraordinary that China should still be regarded as an NME, a word of explanation is in order: an NME is a country in which the State subsidizes enterprises or indulges in other non-market behaviour, despite WTO rules against it. So, an NME is allowed to cheat, if you will; but the other side of the coin is that for an aggrieved counter-party, the burden of proof is lower in anti-dumping proceedings. China's accession agreement to the WTO allows it to retain NME status only until 2015; but the change is not in China's gift, and both the USA and the EU persist in regarding China as an NME, despite frequent requests from China for them to treat it as a market economy.