The 1% Minimum Turnover Tax (IMCA), applied to companies with annual revenues of more than 50 million euros, causes major economic distortions in the Romanian economy and disproportionately affects strategic industries. Approximately 75% of the CAEN codes are affected, and the most exposed sectors are the very industrial and logistical pillars of Romania: manufacturing (including automotive), trade, transport, energy and agriculture. The IMCA also affects a substantial part of the labour force – around 1 million employees, i.e. 22% of private sector employees.

The study “The impact of the Minimum Turnover Tax on the economy: a sectoral analysis” shows that more than 40% of the economy’s turnover – equivalent to more than 200 billion euros – is generated by companies subject to this tax regime.

The IMCA is applied to companies with profitability below 6.25%, which, according to the study, penalises businesses with low margins, fostering unfairness between players and encouraging defensive behaviours such as artificial fragmentation of businesses, a shift towards lohn-type activities or business relocation. The authors warn of a high inflationary risk caused by the passing on of costs to consumers, as well as the chilling effect on investment in technology and development, at a time when global competitiveness demands accelerated adaptation.

The IMCA not only fails to tackle tax evasion – the real problem with the system – but also hits compliant companies, making Romania less attractive for investment, emphasised Ruxandra Jianu, co-founder of The Tax Institute. “IMCA must be eliminated as soon as possible, as it erodes the competitiveness of local companies, discourages investment, distorts the market and fragments business, generates low tax revenues and has disproportionate economic costs,” Ruxandra Jianu emphasised.

Environmental representatives confirmed the severity of the negative effects of IMCA. Radu Burnete, executive director of the Concordia Employers’ Confederation, said: “This tax has had very harmful effects on the economy. There are certain sectors that are suffering very, very badly, their margins have been squeezed fantastically, there are many Romanian companies affected.” For his part, Dan Manolescu, president of the Chamber of Tax Consultants, criticised the lack of coherence and the reactive nature of the fiscal-budgetary policy, stressing the need for a systemic and logical approach in the construction of the fiscal framework.

The study, available in full on The Tax Institute’s website, shows that the measure is fiscally inefficient, with an estimated contribution of just 1 billion euros to the budget. By comparison, reducing the amount of uncollected VAT – more than 8.5 billion euros – would bring in much more substantial and sustainable revenue.

The study by The Tax Institute, the first Romanian think tank dedicated to taxation, was launched on 2 April at an event hosted by the Aula of the Central University Library “Carol I”. The materials from the event can be found HERE.