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

35 Pages Posted: 2 Feb 2012

See all articles by Christoph Spengel

Christoph Spengel

Centre for European Economic Research (ZEW)

Sebastian Lazar

affiliation not provided to SSRN

Lisa Evers

ZEW – Leibniz Centre for European Economic Research

Benedikt Zinn

ZEW – Leibniz Centre for European Economic Research

Date Written: January 1, 2012

Abstract

We trace back Romania’s development to a low-tax country among the Member States of the European Union by analyzing 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.

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

JEL Classification: H22, H25, O38

Suggested Citation

Spengel, Christoph and Lazar, Sebastian and Evers, Lisa and Zinn, Benedikt, 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 (January 1, 2012). ZEW - Centre for European Economic Research Discussion Paper No. 12-003, Available at SSRN: https://ssrn.com/abstract=1997144 or http://dx.doi.org/10.2139/ssrn.1997144

Christoph Spengel (Contact Author)

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany

Sebastian Lazar

affiliation not provided to SSRN ( email )

Lisa Evers

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Benedikt Zinn

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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