AFP, Bucharest :
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 percent of gross domestic product in 2013.
That represented about 40 billion euros ($53 billion) a year of uncollected taxes in an economy in which tax revenue amounts to about 46 billion euros.
“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, told AFP. The revenue shortfall translates into dilapidated hospitals, patients unable to get treatment or schools lacking basic facilities.
“With revenues accounting for less than 33 percent of GDP, compared to an EU average of 45 percent, Romania will never have an education system as good as Germany’s for instance,” Dumitru said.
“And sacrificing a nation’s education and health means sacrificing its future.”
From the underpaid mason working on the black market to the prosperous businessman benefiting from fraud, tax avoidance is omnipresent, prompting authorities to toughen their stance.
In 2013 a special anti-fraud body (DGAF), tasked with clamping down on criminal rings, was set up within the tax agency.
In one of the most spectacular cases uncovered by the DGAF, a network of 30 Turkish, Jordanian and Romanian nationals cheated the government out of 24 million euros in value added sales tax (VAT) dodging.
The alleged fraudsters set up a complex chain of 58 dummy companies to cover up their fraudulent operations selling 100 million euros’ worth of fruit and vegetables on the Romanian market.
