I started my first business at 18, a popcorn factory. Since then I have been through manufacturing, distribution, transport, insurance and online. I have lived through more tax codes, more crises and more governments than I care to count. And if anyone asked me what wore me out the most in all those years, I wouldn’t say taxes. I’d say how often they change.
This year has been a textbook case. Rules amended by emergency ordinances (government decrees that take effect immediately, before Parliament gets a say), thresholds moved, tax regimes switched from one month to the next, drafts announced on a Friday evening and withdrawn on Monday morning. Then, in November, came the cherry on top: the government adopted the transfer of social security contributions from employers to employees, starting 1 January 2018. That is, in about a month. I don’t want to argue here whether the measure is good or bad. I want to talk about something I think matters more than any percentage: predictability.
I can budget for a tax rate. I can’t budget for chaos
An entrepreneur can adapt to almost any tax, on one condition: knowing about it in advance. Tell me taxes will go up next year and I’ll redo my numbers, adjust prices, maybe postpone an investment. Unpleasant, but it’s a cost I can put in a spreadsheet. What I can’t put in any spreadsheet is uncertainty. You cannot plan a year when you don’t know which rules will apply three months from now.
I’ve written before about what a fair society means to me: clear rules, the same for everyone, respected by everyone. The state should be the first to follow that principle. When the referee changes the rules mid-game, it’s hard to ask the players to play fair.
Budgets turn into fiction
November and December are when every serious company draws up next year’s budget. How much we’ll sell, how much we’ll spend, whom we’ll hire, what we’ll invest in. This year, thousands of business owners are planning 2018 without knowing exactly what salaries, contributions and obligations will look like on 1 January. Implementation details are still being discussed, accountants are still interpreting, and payroll software has to be updated within a few weeks.
Say you run an online store with 15 people. You’ve negotiated salaries, promised a raise, worked out the margin on every product. Now you have to redo all of it: what the gross salary looks like, what people see on their payslip, what each person actually costs you. And explain to worried employees what is happening to their money. That isn’t productive work. It’s repairing something someone else broke.
Prices, hiring and contracts already signed
The effects of a sudden change don’t stop at the accounting department. They ripple through the whole business:
- Prices. If you’ve sent out quotes or signed one-year contracts at fixed prices, any new cost comes out of your margin. The client isn’t to blame and usually has no intention of renegotiating.
- Hiring. When you don’t know what a new person will cost, you postpone the hire. An uncertain entrepreneur is a cautious one, and caution multiplied across a whole country means jobs that never get created.
- Investment. Nobody buys new equipment or opens a new office when the rules may change before they’ve earned their money back.
- Accountants. They are probably the most exhausted people in the Romanian economy this year. Every change means new interpretations, new forms, and questions from clients they can’t answer yet either.
What a foreign investor sees
I’ve spent years looking at markets abroad. With Retargeting we’re aiming at customers in the United States, and I’ve talked to people who decide where to put their money. For a foreign investor, Romania has good arguments: talented people, competitive costs, a growing market. But the first question they ask isn’t “what’s the tax rate?” It’s “how stable are the rules?”
An investor will accept a higher tax in a predictable country and steer clear of a low tax in a country where they don’t know what’s coming. Risk has a price, and fiscal instability goes straight into the cost of capital. I’ve also written about Romanian startups that could conquer the world: one of the things holding them back is that a foreign fund looks at the business environment, not just the product.
Trust is lost quickly and earned slowly
The biggest cost doesn’t appear on any tax return. It’s trust. When rules change often and without debate, business owners learn not to believe anything that gets announced. Everyone waits, nobody commits long-term, and some start looking for loopholes or move their companies elsewhere. Not necessarily because taxes are lower there, but because there they can sleep at night.
After 20 years of entrepreneurship in Romania I can say one simple thing: the best years for my businesses weren’t necessarily the ones with the lowest taxes. They were the ones when I knew what was coming.
What a predictable system looks like
We don’t need to invent anything. Plenty of countries already do this, and the principles are common sense:
- Advance notice. Any significant tax change should be announced at least 6 to 12 months before it takes effect, ideally at the start of a fiscal year, not in the middle of one.
- Real public consultation. Not a page on a ministry website for a few days, but actual discussions with those affected: business associations, accountants, small companies, not just the big ones.
- Impact assessments. Before changing a tax, the state should publish who wins, who loses, what implementation costs and what might break.
- Stability for several years. A tax code that stays broadly the same for at least three or four years, regardless of who is in power.
- No emergency decrees on taxes, except in genuinely urgent situations. A new tax is rarely an emergency.
- Clear guidance, on time. Implementation rules should be published together with the law, not after companies have already started getting it wrong.
None of this is left or right. It’s simply how a state treats taxpayers as partners rather than as a cash machine to raid whenever it runs short. I said something similar when I wrote about a state that lags behind its people: the problem isn’t the good people inside institutions, it’s the lack of a process.
What we entrepreneurs can do
We can’t control how fast laws change, but we can do a few things. Keep a cash reserve for surprises. Write adjustment clauses for legislative changes into our contracts. Work with good accountants and actually listen to them. And above all, make our voices heard, through business associations, public consultations, articles like this one. Calmly, with arguments, without hysteria and without turning it into a political fight.
Because a country where entrepreneurs can plan is a country where people get hired, money gets invested and, in the end, more taxes get paid, not fewer.
How are you putting together your 2018 budget? Have you already worked out what the 1 January changes mean for your company?