Tax Fraud could be Draining the Potential from the Romanian Economy

Currently, tax evasion is estimated to be one of the biggest issues that has begun to break down the heart of Romania’s economy, holding back the country and ensuring it remains steadily in place as one of the poorest places in the European Union. The estimated costs of the undeclared economy are considered to be huge, and approximately a quarter of the people working in Romania are currently believed to be out of reach of most tax inspectors. At this point, if all activity within Romania was properly taxed, it is believed that national revenues could double.

Currently, tax evasion is estimated to be one of the biggest issues that has begun to break down the heart of Romania’s economy, holding back the country and ensuring it remains steadily in place as one of the poorest places in the European Union. The estimated costs of the undeclared economy are considered to be huge, and approximately a quarter of the people working in Romania are currently believed to be out of reach of most tax inspectors. At this point, if all activity within Romania was properly taxed, it is believed that national revenues could double.

Today, undeclared taxable activity exists across all twenty eight members of the European Union, costing approximately the equivalent of $1,333 billion every year, as estimated by the European parliament. In some countries, the undeclared economy can count for a large portion of activity, but experts consider Romania to be one of the most severely affected, despite campaigns hosted by EU authorities in an attempt to crack down on tax evasion and corruption.

Well, has Romania considered simplifying the tax code?

The current figures

A recent report that was issued by the anti-money laundering committee within the council of Europe suggested that Romania’s undeclared economy made up approximately 28.4% of the gross domestic product seen in 2013. This represents a monetary value of approximately $53 billion a year in uncollected taxes in the economy.

Economists have stated that tax evasion could even be on the rise within Romania, posing a significant threat to the national security of the country. The shortfall in revenue has translated into dilapidated hospitals and patients who are unable to get the treatment and care that they need. Some people suggest though that they should pay for their own health care.

Perhaps Romania would not have this problem if they spent the money on things the people need and want.

Questionable spending choices by Romanian leaders discourages citizen participation perhaps

Aside from this, schools are beginning to lack the basic facilities that they need to properly care for students, and with revenues that account for less than 33% of GDP in comparison to the average in Europe of 45%, it seems that Romania may never have an educational system that is equal to other countries, such as Germany. Of course, most experts suggest that sacrificing a nation’s health and education generally translates to sacrificing that company’s future.

Organized crime runs a better organization than Romanian bureaucrats do

In 2013, a body devoted to anti-fraud measured, named ‘DGAF’ were given the task of clamping down on criminal rings. Some of the evidence that they found was shocking, with one of the most amazing cases including a network of approximately thirty nationals from:

• Turkey

• Romania

• Jordan

Romania’s future hangs in the balance

Cosa Nostra managed to cheat the government out of at least twenty four million euros in VAT dodging. Apparently, these fraudsters managed to set up a complex chain of companies in an attempt to cover their fraudulent operations, selling over 100 million euros worth of vegetables and fruit on the Romanian market. According to the prosecutor’s office, fraud schemes are actually becoming more sophisticated, and if a solution is not found soon, then fraudulent activities could mean the destruction of Romania’s economy.

Romania will then be akin to Detroit, Italy, Spain, and California.