138 companies and 6 IT industry organisations call on the Gov’t not to adopt tax measures that would affect 80% of IT workers

ANIS, the Employers Association of the Software and Services Industry, together with 138 companies and 5 signatory organisations (Business Service Leaders Association, Cluj IT Association – Cluj IT Cluster, Sibiu IT Association, Transilvania IT Cluster, Association of Digital Innovation Centres in Romania – RODIH), sent today a Memorandum to the Romanian Government to point out the impact that the changes in the tax code, which have been reported in the national press in the last few days, may have, namely the taxation of income of employees in the IT industry exceeding 10,000 lei gross.

The signatory companies and associations together employ more than 31,000 people and have a combined turnover of more than €3.4 billion. Start-ups, small, medium, and large companies, local and international companie, service and product companies have joined in this solidarity action, reflecting the unanimous and unequivocal opinion of the industry on the negative impact of the proposed measures.

The signatories draw attention both to the extremely short timeframe for the readjustment of expenditure and wages and to the threshold which essentially cancels out a fair industrial policy in recent years and which will affect more than 80% of the industry’s employees at national level.

Romania, unlike other countries in the region, currently has a policy based on a one-off measure to support industry, but one that has proven to be very effective and has created a regional technology hub and kept highly skilled employees in the country, helping the industry to be competitive in the region and to grow at an accelerated rate of about 3 times the growth rate of the national economy. This development is particularly important in the coming period, when Romania should accelerate the closing of the gap with developed economies through massive digitalization projects.

In the context of weak global demand, Romania must signal to current and potential international investors that confidence in Romania’s fiscal stability is low and market competitiveness in the region is not supported by government policies.

ANIS argues that the Romanian IT industry:

* is one of the largest contributors to the growth of the national economy, in 2022 about 1.3% of the 4.8% GDP growth came from the IT industry 

* is the second largest exporter in the services sector

* is a major contributor to the state budget, with IT employees transferring around 10 billion lei in contributions to the social and health budgets each year, 10 times the total amount of tax relief they receive

* the industry is in the top 5 VAT payers 

* employees in the IT industry support through expenditure at least an equal number (10 to 10.5 ratio) of jobs in other sectors of the national economy.

The signatories call on the Government to consult extensively with industry to identify ways to increase government revenues without affecting the competitiveness of the industry.

At the same time, through this Memorandum, the IT industry calls on the Government to maintain the facilities, an action that will send a clear, unequivocal signal of support for the IT industry as an industry of strategic importance. The facilities for the IT industry are still having a strong effect and generating further growth in GDP by increasing the tax base.

Should the Government decide to change the tax regime applicable to employees in the IT industry, the signatories call for this action to be implemented gradually. The Fiscal Code provides for a minimum of 6 months for the implementation of new taxes to allow companies to adjust the budgets under which they operate. Too short implementation deadlines will make it difficult for Romanian companies to adapt to such sudden tax policy shifts. The World Bank report on Romania’s tax system states very clearly – also considering the timeline agreed in the NRRP – that a possible gradual reduction of tax facilities in the economy should be implemented between 1 January 2025 and 1 January 2028, giving companies time to make the necessary adjustments.

The graph below, extracted from the study conducted by Roland Berger for ANIS and published in February 2022, reveals Romania’s positioning at regional level, in terms of competitiveness in relation to the other countries analyzed in the study.  As it can be seen, the elimination of tax facilities for the IT industry will increase the total cost of salaries, putting us behind countries such as Poland and Bulgaria.