Following weeks of public consultation and pushback from the local business communities, Romania’s grand coalition government has adopted a major fiscal policy reform package aimed at improving the country’s public finances and curbing the budget deficit. The package is crucial to Romania continuing to receive post-pandemic EU recovery funds, needed for ensuring infrastructure development and economic growth.

Introduced by Romanian Prime Minister Marcel Ciolacu, the package holds wide-reaching implications for international businesses, large companies, SMEs, households and the public sector. Most importantly, from a corporate perspective, the government is set to impose a conditional turnover tax on companies with over €50 million in annual turnover, a separate turnover tax on banks, while businesses in a number of other sectors could also see tax increases.

The corrective fiscal measures have been criticized by some investors, business associations and academics, while a part of the opposition also challenged the measures at Romania’s Constitutional Court, which is set to make a final decision on the application of the package on 18 October. At the same time, Aretera’s baseline scenario assumes that the stability of Romania’s governing coalition will remain unaffected and the fiscal package will likely be enforced as planned by the government.

Below, Aretera takes a deeper look at Romania's fiscal reform package and its implications for investors.