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Romania's development to a low-tax country: Effective corporate tax burden in Romania from 1992 to 2010 and Romania's current ranking among the eastern European member states

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  • Spengel, Christoph
  • Lazar, Sebastian
  • Evers, Lisa
  • Zinn, Benedikt

Abstract

We trace back Romania's development to a low-tax country among the Member States of the European Union by analysing the major tax law changes in corporate taxation since 1992. We find that the significant reduction of the corporate income tax rate from 45% in 1992 to 16% since 2005 has not been accompanied by a comprehensive broadening of the corporate income tax base as prevalent in many longstanding Member States of the EU and the OECD. Our analysis is not limited to a comprehensive description of the development of corporate taxation in Romania, but goes on with a numerical analysis of the tax burdens at different periods of time which constitute milestones in the development of corporate taxation in Romania. For this purpose, we apply the European Tax Analyzer, which is a computer-based model firm approach. We find that the average company tax burden of the underlying model company has dropped significantly by almost 65% since 1992. Furthermore, our numerical analysis does not confirm the tax base broadening policy. As a result, Romania holds position two among the group of Central and Eastern European EU Member States. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-003.

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Date of creation: 2012
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Handle: RePEc:zbw:zewdip:12003

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Keywords: corporate taxation; effective tax burden; transition economy; EU accession countries; tax reform; tax-rate-cum-base-broadening reform;

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  1. Lars P. Feld & Jost Henrich Heckemeyer, 2009. "FDI and Taxation: A Meta-Study," CESifo Working Paper Series 2540, CESifo Group Munich.
  2. Simon Loretz, 2008. "Corporate taxation in the OECD in a wider context," Working Papers, Oxford University Centre for Business Taxation 0821, Oxford University Centre for Business Taxation.
  3. Flaviu Mihaescu & Liviu Voinea, 2009. "The Impact of the Flat Tax Reform on Inequality: The Case of Romania," wiiw Balkan Observatory Working Papers, The Vienna Institute for International Economic Studies, wiiw 81, The Vienna Institute for International Economic Studies, wiiw.
  4. Michael P. Devereux & Rachel Griffith & Alexander Klemm, 2002. "Corporate income tax reforms and international tax competition," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 17(35), pages 449-495, October.
  5. Finke, Katharina & Heckemeyer, Jost Henrich & Reister, Timo & Spengel, Christoph, 2010. "Impact of tax rate cut cum base broadening reforms on heterogeneous firms: Learning from the German tax reform 2008," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 10-036, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Michael P. Devereux, 2008. "Business taxation in a globalized world," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 24(4), pages 625-638, winter.
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