Press Review - July 17, 2017

07.17.2017 By Oana Gavrila

Insolvency Among Top Companies Poses Systemic Risk

Two thirds of the revenues of Romanian companies is in the hands of 1% of large businesses and an insolvency at the top could destabilize an entire sector and cause a ripple effect of insolvencies down the line.

One percent of Romanian companies make two thirds of the country's EUR275 billion corporate revenues, which means the economy is highly polarized, according to a risk assessment by Coface.

“It's easier for large companies to survive legislative changes in the tax system.

High labor costs and fiscal instability mainly affects smaller businesses and SMEs are generally the most vulnerable,” said analyst Laurian Lungu.

He added a market exit or an insolvency of a large company such as OMV Petrom, Automobile Dacia or Kaufland could destabilize the entire business environment. For instance, OMV Petrom contributes 5% to Romania's consolidated budget.

Coface said in its report one in two companies in Romania face major insolvency risks.

 

Romania To Send EC Bills Totaling EUR93M For SME Program

Romania will send the European Commission bills for EUR93 million under the operational program for SMEs.

The program was allotted EUR100 million and eases access to financing for small businesses.

In Romania, SMEs account for 99% of all businesses and many are faced with significant financing needs. The EU-funded program helps SMEs get access to cheaper loans.

 

Around 100 People Protested Social Democrat Government

Around 100 people protested in Bucharest Sunday evening against the social democrat government, gathering in Victory Square and marching toward the Social Democratic Party's headquarters.

Protesters gathered over the government's alleged plan to change legislation to allow people with prior convictions to hold public office.

“We don't want to be a nation of thieves,” protesters chanted.

 

Ruling Coalition Decides On Turnover Tax Plans Monday

Romania's ruling coalition is set to decide Monday on plans to introduce a tax on turnover for companies.

After a meeting with EU officials in Brussels last week, Prime Minister Mihai Tudose said the proposed tax would not be applied.

“I reiterated very firmly that we will not introduce a tax on turnover and we will ensure fiscal predictability and we expect to stay within the 3% [of GDP budget deficit limit],” said Tudose after talks in Brussels with EC President Jean-Claude Juncker and Vice-President Frans Timmermans.

Romania's government sowed panic in the business community announcing plans to scrap a 16% tax on companies and replace it with a 1% to 3% tax on turnover. Business owners associations criticized the plan, saying it would drive investors away, hindering economic growth, while analysts estimated such a tax would drive a third of companies in Romania to insolvency.

 

Iohannis on Tax Changes: No Need to Reinvent the Wheel

Romanian President Klaus Iohannis said the government doesn't need to do anything special or reinvent the wheel when it comes to the tax system.

He said Frequent changes in approach in the fiscal sector don't do anyone any good.

“We need stability and predictability. These frequent changes in fiscal approaches don't do anyone any good. They cannot be put into practice very quickly. The business community and regular people want to know what the state wants and how it will implement it. That's stability and predictability,” said Iohannis, adding stability and predictability must be guaranteed regardless of who leads the government.