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Study: One fifth of the business turnover reported by companies in Romania is related to companies with ties to tax havens
One fifth of the business turnover reported by companies in Romania is related to companies with ties to tax havens, according to findings of a KeysFin study released on Thursday.
'Barbados, Dutch Antilles, Bahamas and Belize are some of the favourite destinations of business people, not just for travelling, but particularly for business. Local as well as multinational companies have opened connections in offshore countries, where rates and taxes are very small or even inexistent. It is certain that the Romanian Government is robbed of important revenue from rates and taxes. The business people are not to be blamed, because what they do is trying to optimise their business while observing the legislation in force. Our study of data provided by active companies in Romania with at least one legal entity as shareholder in an offshore regime reveals that in 2015, more than 5,300 such companies were officially registered as thus having conducted business of 48 billion euros, which is nearly 20 percent of the total business turnover nationwide in Romania,' the study shows.
Most of the active companies were operating in real estate, trade, various professions, manufacturing and IT.
KeysFin says most of the companies in question were multinationals specialising in building commercial spaces, residential compounds, as well as retail traders, from fashion to food.
'An important share in terms of business was held by export companies and manufacturing companies, given that their turnover combined made up almost 40 percent of the total turnover of companies with offshore connections. Statistics also reveal that most of the companies studied had ties to countries with a highly attractive tax legislation in Europe (83 percent of all), with most of them having registered offices in Cyprus, the Netherlands, Luxembourg and Malta. The remaining were reported financial data connected to companies from the Cayman Islands, the Virgin Islands, Panama, Bahamas, Hong-Kong, Liberia, Bermuda, Nauru, Barbados, the Netherlands Antilles and other exotic destinations highly welcoming of foreign capital,' the study says.
A relevant indicator of the developments in the business of companies with offshore ties is the rise in employees from 271,000 in 2010 to 341,000 in 2015.
"Employees of companies with offshore legal entities as shareholders came to make up 9 percent of the legal workforce of Romania, which is a significant percentage when seen against the circumstances of the local business environment,' says KeysFin.
It adds that the developments in the workforce size is the most significant indicator of profitability of tax-fleeing business, given that association with an offshore company secures the possibility of the associated companies to optimise their cash flows so as to pay fewer rates and taxes to the Romanian state.
"In the absence of a strict regulatory framework, the Romanian Government will continue to passively watch as capital flees Romania. In essence, tax measures are needed that will incentivise investors to keep their money in Romania, invest in the Romanian economy, with the Romanian Government thus reaping more revenue from rates and taxes," the study shows.