A Dive into Romania’s Fiscal Odyssey
article by Andreea Gudin
It was a day of reckoning in the Romanian Parliament, December 19, 2023, as lawmakers made a decisive move with implications echoing through the corridors of fiscal policy. Spearheaded by Marcel Ciolacu and Nicolae Ciucă of the PSD and PNL, this unexpected legislative manoeuvre threw a lifeline to fiscal evaders.
The guise? Economic recovery.
The verdict? Tax evasion under a million euros would now elicit nothing more than a nominal slap on the wrist. It was a bipartisan nod to leniency in the grand theater of fiscal responsibility.
As the parliamentary saga unfolded, the initial stumble of securing votes plunged the chamber into a brief state of chaos. Only 65 “for” votes reverberated, a mere four short of the requisite 69. Panic set in, and the Senate President deemed the act unadopted, passing the baton to the Chamber of Deputies for the final say. A twist emerged: PSD cried foul, claiming malfunctioning voting cards. A second vote miraculously secured 70 “for” votes, declaring victory.
And with that, Romania embarked on a fiscal experiment, raising myriad questions about the motivations behind this legislative roll of the dice.
Navigating Assumptions and Intentions:
Assumption 1: Economic Resilience Through Reduced Legal Strain
The narrative of fostering economic resilience through reduced penalties echoed through the halls of Parliament. Yet, history cautions against the pitfalls of lenient tax policies. It was reminiscent of the Enron scandal of the early 2000s, where lax fiscal oversight birthed a culture of financial misconduct. Similar narrative? I guess we will find out, soon.
Assumption 2: Encouraging Growth Through Fiscal Flexibility
Advocates championed a flexible environment for business expansion. But the risk lay in prioritising short-term gains over long-term fiscal responsibility – an atmosphere of opportunistic financial strategies, potentially jeopardising long-term stability, reminding us of another “told you so” example – the 2008 collapse of Lehman Brothers.
Assumption 3: Promoting Fairness and Equitable Treatment
In envisioning a landscape where fiscal evasion thresholds widen, the assumption lingers—fairness, particularly for struggling enterprises. Yet, it beckons a profound question: could this well-intentioned shift inadvertently become a gateway to preferential treatment, further entrenching economic divides?
Contemplating a historical allegory, one is drawn to the East India Company during the age of colonial mercantilism.
In an era where imperial pursuits intertwined with corporate interests, the East India Company, adorned with legal privileges, navigated an intricate network of trade and governance. Legal frameworks, rather than fostering equity, sculpted a narrative of preferential treatment. The company flourished under the protective umbrella of governmental favouritism, as the economic disparities burgeoned. The ramifications of all these preferential legal arrangements reverberated for generations, and shaped our socio-economic hierarchies enormously.
And so, the echoes of history remind us that legal frameworks, hasty calibrated, have the potential to mould not only economic structures but the very soul of societal equity.
Searching For A Decent Model of Fiscal Sanity
Comparisons with Germany’s voluntary disclosure program highlighted the hasty nature of our legislative move. Germany’s approach was a masterpiece of planning, emphasising a balance between compliance encouragement and maintaining the integrity of the tax system. In contrast, our swift manoeuvre lacked the nuanced conditions, risking far too many consequences and a potential add-on to our fiscal instability.
Beneficiaries
In the aftermath, eyes will be keenly set on identifying the companies and sectors poised to benefit the most, as future analyses could and will potentially expose relationships between the business environment and political decision-makers.
The coming months promise riveting insights into the economic and may I say …political repercussions of this legislative roll of the dice.
Andreea Gudin
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