Tax fraud drains potential from Romanian economy

Tax evasion is eating away at the heart of Romania and holding back the country, among the poorest in the European Union, in its efforts to catch up, analysts warn. The estimates for the costs of the so-called black or undeclared economy are huge: about one quarter of economic activity and one quarter of people in work are believed to be beyond the reach of tax inspectors. If all activity were taxed fully, national tax revenues would almost double. Undeclared activity exists across the 28 members of the European Union at a cost of at least 1,000 billion euros ($1,333 billion) per year, the European parliament estimates. In some EU countries, the shadow economy accounts for a significant slice of activity, but the European parliament said that Bulgaria and Romania were the most severely affected. This is despite campaigns by EU authorities to encourage governments of new members in Eastern Europe to crack down on corruption and tax evasion. Bulgaria is the poorest member of the EU, and Romania comes second. A recent report by the Council of Europe's anti-money laundering committee said that in Romania, the shadow economy accounted for 28.4 per cent of gross domestic product in 2013. ‘Tax evasion is on the rise in Romania and it poses a threat to its national security,’ economist Ionut Dumitru, head of the country's fiscal council, said, according to AFP.