Effective Corporate Taxation in Romania

Using data from publicly available corporate reports, this study performs computations of effective tax rates for Romanian-listed companies between 2000 and 2010, while introducing two alternative measures of effective tax rates meant to capture the burden triggered by nonprofit taxes and labor-related taxes. It was found that the effective tax rate computed as the ratio of profit tax to pretax income was below the statutory corporate income tax rate throughout the period, except for 2009 and 2010 (when an alternative minimum tax was levied). When computing the effective tax rate as a ratio between total taxes and contributions charged to companies' accounts and net profit before all taxes and contributions, the results are consistent with those found by World Bank/PricewaterhouseCoopers in their series of Doing Business/Paying Taxes surveys. The last of the effective tax rates computed by plotting all the taxes and contributions borne to companies' turnover showed a declining trend over the period, except again for 2009 and 2010. The distribution of the tax burden showed that among all public finance liabilities, corporate income tax recorded the lowest share of companies' turnover, whereas social security contributions imposed the highest burden, which increased since the adoption of the flat tax in 2005.