Areas of Strength
- Romania has made important steps to reduce tax expenditures and increase the fairness of their tax system. Exemptions from PIT for workers in certain sectors were abolished in 2025, with the intention of raising revenue and improving the horizontal equity of the system. They have also reduced the maximum income limit to qualify as a microenterprise, which means more companies fall within the scope of CIT.
- Romania has processes in place for monitoring and assessment of tax expenditures. Romania reports foregone revenues of about RON 78.1 billion (4.2% of GDP; EUR 15.5 billion) in 2025. Regular, thorough public sector spending reviews integrated into the annual budget process could help better evaluate cost-effectiveness and how well tax expenditures meet policy priorities. The VAT policy gap in Romania was significantly lower than the EU average in 2023. The application of reduced VAT rates in Romania has the highest overall redistributive effect in the EU (just under 20%).
Areas for Improvement
- Romania has the highest VAT compliance gap in the EU, estimated at around 30%. While systems for VAT collection in Romania feature automatic exchange of information, a relatively standard VAT audit programme, and immediate responses to late payments, they are proving to be ineffective at lowering the VAT compliance gap.
- While Romania estimates CIT and PIT tax gaps using a top-down approach, it does not publish the results, which would help transparency. However, according to Commission estimates, Romania has the highest CIT gap among Member States for which estimates are available. Romania has one of the largest shadow economies in the EU. Estimated at 29% of GDP, the shadow economy has a significant impact on revenue collected and increases the tax gaps in Romania.
- Romania has made progress in decreasing its levels of outstanding tax arrears in recent years, but this figure is still well above EU average. Romania does not have a tax recovery strategy. This indicates that there may be scope for Romania to increase the importance that they place on tax recovery.
Tax Complexity
Romania ranks 23rd out of the 27 Member States in the Tax Complexity Index (‘TCI’), where a higher rank corresponds to lower tax complexity. The TCI is based on the Global MNC Tax Complexity Project, a joint research project of Deborah Schanz (LMU Munich) and Caren Sureth-Sloane (Paderborn University). The TCI 2024 places Romania 25th among the Member States with regards to Tax Framework Complexity, and 12th with regards to Tax Code Complexity. This may indicate that whereas Romania has a fine structure of the tax regulations (notably in the area of royalties, according to the authors), the tax processes carried out by the tax authorities are not very efficient (particularly in the area of enactment).
The full Commission Staff Working Document of the Mind the Gap Report - Challenges and opportunities for tax compliance and tax expenditure in the EU regarding Romania can be found here.
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