Romania’s shadow economy can be lowered by EUR 14 bn over the next seven years – study

In Romania the shadow economy can be reduced up to 9.9 percent cumulatively over the next seven years, representing about EUR 14 billion, if several measures, successfully adopted in other countries, will be gradually implemented, according to a recent PriceWaterhouse Coopers study.

In this regard, the consultancy company recommends limitation of daily cash receipts and cash threshold for revenue operations both from individuals and legal entities, organization of tax lotteries in which those who send a minimum of tax receipts can receive awards based on random draws, mandatory use by all traders of cash registers online connected to the tax authorities systems (along with POS availability for client), reporting to fiscal authorities of electronic payments by processors so can be used in the tax inspections, thereby strengthening their ability to control.

The success of these measures depends on the implementation, other countries experience showing the importance of details. Thus, tax authorities must strengthen fiscal discipline by imposing significant sanctions and penalties to discourage circumvention initiatives of legislation and by maximizing the level of compliance of taxpayers, PwC emphasizes.

In the last 5 years, the cash share in circulation in Romania was over 60 percent of GDP, six times higher than the level recorded in the euro area countries, said Bogdan Belciu, partner within PwC. Instead, the card payments share in Romania is only 4.4 percent of GDP, more than three times lower than the EU average and more than four times lower than the average in Western European countries.

At the same time, Romania has one of the largest shadow economies in the EU – 28.4 percent of GDP, compared to 18.8 percent and 24.4 percent ECE average (in EU Romania is actually surpassed only by Bulgaria).

authoritiescard paymentscashfiscalGDPpenaltiesPwCRomaniashadow economystudytaxtaxpayers
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