Press Release
November 13th, 2025
Bucharest
ABSL Analysis: Economic uncertainty and rising taxation increase pressure on Romania’s business services industry
Rising inflation, a widening budget deficit and a lack of economic predictability are negatively impacting the competitiveness of the business services industry. These dynamics are constraining new investment decisions and may accelerate the relocation of activities to regions where cost structures are more stable and predictable. ABSL (the Association of Business Service Leaders) highlights these risks through an analysis conducted in partnership with Deloitte Romania, assessing the impact of the current economic environment on the industry’s long-term development.
Reducing the budget deficit remains a key macroeconomic priority. In addition to structural reforms, targeted fiscal and budgetary measures are also needed. The digitalization of tax administration would improve revenue collection and reduce tax evasion, while greater efficiency in public spending and enhanced absorption of European funds could ease pressure on the state budget. At the same time, economic growth could be stimulated without direct budgetary impact through the simplification of administrative procedures for companies and entrepreneurs.
“The business services industry generates significant revenues for the state budget, ranking among the top 5 sectors by share of GDP and employing over 200,000 people. The workforce in this sector is highly skilled and among the best paid in the economy, contributing substantially to the state budget through taxes, social contributions and increased domestic consumption. In a globally competitive industry where relocation to regions with lower labor costs or more attractive fiscal and legislative frameworks is relatively straightforward, Romania cannot afford to lose these investors. Therefore, beyond short-term deficit reduction measures, the Government needs a coherent long-term strategy to safeguard a high value-added sector, closely linked to advanced technologies and capable of retaining top talent in the country. We cannot sacrifice this strategic resource for short-term gains, risking the loss of an entire industry, the revenues it generates, and Romania’s competitive advantage,” said Catalin Iorgulescu, ABSL Vice President.
The business services industry is highly exposed to fiscal and legislative changes, given the global competitive environment and the relative ease of relocating operations to more attractive regions. In recent years, Romania has lost competitiveness to neighboring countries that offer structured support mechanisms, including grants, tax incentives and professional training programs. The introduction of additional taxes or administrative barriers would further widen this competitiveness gap.
“We cannot overlook the renewed inflationary pressures. As salary levels in Romania converge toward regional averages, sustaining wage increases in line with inflation becomes increasingly challenging. For this reason, we are seeing increased attention from our clients regarding total cost structures, which in the case of services companies are primarily driven by personnel-related expenses, such as salaries and training, ” said Alexandra Smedoiu, Partner, Deloitte Romania.
Romania needs incentives to support the employment of young graduates, who are increasingly affected by the decline of entry-level positions taken over by AI-based solutions, as well as schemes to stimulate highly qualified jobs, which have proven effective in the past. Currently, incentives already exist for research and development activities, including an additional 50% deduction for eligible expenses and income tax exemptions for employees, but these measures should be strengthened and expanded.
Recent increases in taxation affecting freelancers, including changes to income thresholds and health insurance contributions, have added further pressure. Authorities appear to be tightening oversight of these activities, often viewed as substitutes for traditional employment, with increased controls expected. Freelancers are also impacted by new capitalization requirements for companies. This environment affects business services companies directly, as approximately 18% of them engage freelancers in project delivery, according to the 2024 ABSL report.
A proposal with potentially significant implications for the sector is the limitation of deductibility for services acquired from non-resident affiliated entities to 1% of total expenses. Given the broad scope of this measure, covering consulting, management services and certain intellectual property-related costs, the anticipated effect is an increase in the effective tax rate. This development could reduce a company’s competitiveness within multinational groups and may prompt relocation decisions toward regions with more favorable tax regimes.
“The minimum turnover tax has generated significant financial pressure and uncertainty in the market, particularly as it is applied alongside additional taxes targeting multinational companies. Our analyses show that several dozen outsourcing companies fall within the scope of this measure. From my perspective, however, this tax is misaligned with established transfer pricing regulations and methodologies applied by the affected companies, leading to higher effective tax rates. If the objective is to increase direct tax revenues, a more efficient approach would be to gradually align the corporate income tax rate with the European average of approximately 20–21%,” concluded Alexandra Smedoiu, Partner, Deloitte Romania.