Romania could attract billions of euros from the underground economy and reduce the pressure on public finances through a combination of unconventional measures, namely a tax amnesty and the expansion of the distribution of state securities in retail chains, such as supermarkets and gas stations, according to an analysis by the consulting company Frames. «Romania has gone through tax amnesties before, through all kinds of measures to stimulate and remove penalties. Unfortunately, in most cases, they demonstrated that the cancellation of accessories in exchange for paying the main debts only offers a mouthful of oxygen in the short term to the state budget. In other words, there were partial amnesties that did not achieve their real goal, that of bringing money from the underground economy to light and determining Romanians who keep their money abroad to repatriate them», says Adrian Negrescu, Frames manager. According to the analysis, examples such as Italy, through the Fiscal Scudo program, but also Spain or Germany, show that voluntary compliance mechanisms can contribute to the repatriation and taxation of important volumes of capital, when they are accompanied by sufficient incentives and guarantees regarding the use of funds. You may also be interested: Frames analysts believe that a well-calibrated fiscal amnesty could generate additional resources for the budget and could contribute to complying with deficit reduction targets without the need for additional increases in taxes. A second proposed measure aims to expand the way in which the population can invest in public debt. Currently, the state attracts funding from the population through the Tezaur and Fidelis programs, but access to these instruments still requires the use of specific channels, such as Treasury units, Romanian Post offices or trading accounts opened with brokers. Frames proposes a much wider distribution of government securities, by integrating them into commercial networks with high traffic. «The transformation of government bonds into vouchers or valuable coupons accessible at cash registers in supermarkets, gas stations or other large retail chains would completely change the rules of the economic game. The citizen could exchange cash directly for a guaranteed financial instrument, turning a trivial act of consumption into an act of micro-investment», says Adrian Negrescu. Such a measure could attract a new category of investors to the government bond market, consisting of people who have savings in cash and which do not currently use banking or investment products. In addition, the distribution through retail networks would allow the state to more efficiently capture the existing liquidity in the economy and reduce the dependence on external loans, which are considered more expensive and less flexible. Another advantage is the development of an efficient alternative financing system for the state. It’s a paradigm shift that would also force the banking system to look for other solutions to ensure a guaranteed profit,» the authors of the study warn. However, the technical implementation of such a hybrid system is not without security challenges. Any radical simplification of access to state financial instruments must strictly comply with the European rules against money laundering of instant identity validation at cash registers, correlated with clear transaction thresholds. Without these strict technical filters, the risk of supermarket chains becoming machines for laundering illegally obtained capital would completely negate the economic benefits of the project, the Frames analysis also shows.
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