MICROCAPITAL BRIEF: Simplified Tax Code for Microenterprises in Romania Snares Unprofitable Businesses

The government of Romania reportedly has simplified the tax rate for microenterprises, obliging them to pay a 3-percent tax on turnover. Before, small firms could either pay a 16-percent tax on profits or the turnover tax, such that unprofitable firms were not required to pay taxes. Some argue that the new tax regime may increase tax evasion and bankruptcy rates within the micro-sector.

For the year 2011, eight Romanian microfinance institutions (MFIs) report to the US-based nonprofit Microfinance Information Exchange (MIX) a gross loan portfolio of USD 337 million and approximately 41,000 active borrowers.  Of these institutions, only ProCredit Bank Romania reports accepting deposits; the number of depositors it serves is not available, but the amount of deposits totals USD 222 million.

By Brendan Millan, Research Associate

Sources and Additional Resources:

[1] Balkans.com Business News: “Romania Lowers Taxation Threshold for Micro-enterprises”, http://www.balkans.com/open-news.php?uniquenumber=171737

MicroCapital.org story, January 8, 2013, “European Fund for Southeast Europe (EFSE) Loans $17m to Banca Transilvania, Agricover Credit of Romania”, https://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-17m-to-banca-transilvania-agricover-credit-of-romania/

MicroCapital.org story, May 1, 2012: “European Fund for Southeast Europe (EFSE) Loans $453k to Opportunity MicroCredit Romania”, https://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-453k-to-opportunity-microcredit-romania/#more-20989

MicroCapital.org story, May 1, 2012: “International Finance Corporation (IFC) Lends $16m to Agricover Credit to Increase Funds for Farmers in Romania”, https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-lends-16m-to-agricover-credit-to-increase-funds-for-farmers-in-romania/#more-18563

MicroCapital.org story, March 21, 2012: “European Investment Fund, Banca Transilvania Sign $10m Loan Agreement for Microfinance in Romania”, https://www.microcapital.org/microcapital-brief-european-investment-fund-banca-transilvania-sign-10m-loan-agreement-for-microfinance-in-romania/#more-17887

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