The Impact of Tax Avoidance in Romania: Corporate Profit Shifting to Tax Havens

Abstract

This study investigates the impact of tax avoidance on Romania's economy, specifically its relationship with GDP, comparing Romania's situation to other EU member states. The research utilizes a quantitative methodology, analyzing data from 2015 to 2020 through statistical methods, including regression analysis. The findings indicate a substantial increase in profits transferred from Romania to tax havens, rising from 4 billion USD in 2015 to 7 billion USD in 2020, with a peak of 8 billion USD in 2019. The share of profits lost as a percentage of GDP ranged from 2.25% to 3.19%, with an average of 2.63%. Transfers to non-EU tax havens increased significantly, while those to EU tax havens remained constant. Regression analysis shows a positive and significant relationship between GDP growth and profits lost, with an increase of 0.039904 units of profits lost for each additional unit of GDP. These results highlight the economic impact of tax avoidance and underline the need for effective policy measures to address this issue.

Keywords

• tax avoidance
• profit shifting
• tax havens
• romania