Finance News by Mazars Romania - July 2022

Fri | 29.07.2022

Accounting/audit/tax

Finance News by Mazars Romania - July 2022

Mazars publishes CEE Tax Guide 2022

Mazars released the tenth edition of the Mazars Central and Eastern European tax guide. The report on the current taxation regimes of the CEE covers 22 countries: it includes the Visegrad countries, Southeast Europe, Germany, Austria, Moldova, Ukraine, and the Baltic states. Its purpose is to help investors compare the fundamental factors of competitiveness.

Employment Taxes

Mazars’ analysis found that labor costs are decreasing in almost all observed countries, but the actual drop size shows significant differences. The basic approach to income taxation also varies in the region: some countries continue to enforce flat-rate income tax rates (such as Bulgaria, Hungary, and Romania), while others maintain significantly progressive tax rates (e.g. Austria, Germany, and Slovakia).

In the listed countries, average labor costs burdening the employers amount to 15% of gross wages. Still, there are significant differences - over 30 percentage points - between the lowest, less than 5% in Romania, and the highest of over 30% (e.g. in the Czech Republic, Poland, and Slovakia). This highlights that tax systems are hard to compare but also indicates whether governments prefer to shift the burden of labor costs to employees or employers.

A more practical way of comparing systems is the so-called tax wedge, which shows what percentage of total income the state takes away in taxes and contributions. It shows the extent to which a tax on labor income discourages employment, i.e., what percentage of labor costs is paid into the state budget in some form. The indicator varies between 15 and 51% in the region, mainly depending on income levels and family status.

The countries in the region show the most significant variation in wage levels. Minimum wages in the V4 countries range between €500-€650; they are significantly lower in the Balkans and Moldova (below €400) and are not comparable to those over €1,700 in Germany and Austria.

The euro-based average wage in the private sector grew by more than 12% on average, totaling 14% and 19% in Serbia and Hungary, respectively. Average gross wages are highest in the Czech Republic among the V4 countries at around €1,300.

„In Romania, starting from 1 January 2022, the minimum monthly gross wage, without including bonuses or other benefits, has increased from RON 2,300 to RON 2,550. When referring to the average salary in the private sector, the value in Romania has reached RON 6,095 from RON 5,429 in 2021. If at the beginning of the COVID-19 pandemic, the main requirement for job seekers was represented by the job stability, now, the rising inflation is a significant challenge.”, mentioned Edwin Warmerdam, Partner, Head of Tax, Mazars Romania.