Federația Patronală a Energiei (FPE) is sounding the alarm on the need to put in place balanced measures, directed towards the need for deep reform of the national administrative and tax system, as repeatedly emphasized by the business environment.
In the context of the current public discussions, we emphasize the significant role of the electricity, oil and gas production sector in the national economy. The industry constitutes a essential pillar of the national economy, contributing 48.8 billion lei to the consolidated general budget for 2022, a contribution 62% higher than in 2021. This amount accounted for 10.6% of total government revenue in 2022, with the sector being “practically a budget contributor of almost systemic importance”, according to CPAG analysis„The oil and gas industry's contribution to Romania's economy”.
Given the sector's significant contribution to the national economy, we consider it essential to draw attention to the need for a system stable and predictable administrative and fiscal stability. A predictable fiscal framework is crucial for encouraging investment in the oil industry, especially in the context of the transition to green technologies, which entails substantial costs.
In the last ten years, at least 44 amended normative acts with an impact on the taxation system applicable to the upstream sector have been identified, according to the study conducted by Biriș - Goran, „Analysis of the taxation system specific to the upstream oil and gas sector in Romania” (2023).
In a regional and international context in which the need for economic competitiveness is growing, Romania needs a strong industry, supported by an energy sector that is up to the task. A stable energy system is possible through strengthening overall fiscal governance, The industry is already facing a number of major challenges. These include overtaxation and the numerous obligations arising from the implementation of European regulations in this area, which require significant investment.
Many of the challenges facing the industry have been generated by a series of repetitive cycles, perpetuated over time by unbalanced, over-taxing measures. As these unbalanced policy cycles have not been accompanied by measures to administrative and fiscal optimization at state level, the burden on the oil and gas sector has progressively increased. In these circumstances, new investment, with all its attendant benefits, including new jobs and increased revenues for the national budget, is becoming a difficult challenge.
According to the Deloitte analysis “The impact of an investment in the onshore upstream oil and gas sector on the Romanian economy”, a €1 billion investment in the upstream onshore onshore oil and gas sector would generate an impact of €5.8 billion in national GDP and 43,500 new jobs.
Furthermore, the oil and gas industry is contributing to the nationally-owned energy transition through research, development and preparation for the implementation of green technologies. The implementation of all these technologies requires considerable investment and collaboration with public authorities in order to carry out significant projects for the future of the energy transition at national level. It is essential for the Romanian state to benefit from consolidated expertise at the level of the entities involved in negotiating at European level the regulations with an impact on the energy sector.
In this context, we draw attention to the fact that the most accelerated growth was mainly in additional taxation, increase attributable to the additional taxation of natural gas.
Thus, the additional taxation applicable to the sector increased by 11 times in 2022 compared to 2020, and the royalties applicable to the industry increased by 5.2 times in 2022 compared to 2020. Under these circumstances, Romania has by far the highest effective tax rate in 2022 and 2021, 4 times higher than the simple average of effective tax rates found in the other European countries.
We see the need for a real and comprehensive reform of the national administrative system, including cutting red tape and making public spending more efficient. We believe that the main drivers of this change are the need for a flexible administrative apparatus and a vision to reduce artificially increased public spending.
The Federation aims to support the development of the industry and the national economy as a whole, through a constant dialog with Romanian institutions based on the expertise of its members. The industry is ready to contribute to the country's economic growth through its projects and the expertise of its employees in the sector, given the complex economic and strategic challenges Romania faces in the coming period.
Finally, the industry calls for a awareness and greater understanding from the authorities, so that the significant efforts and responsibility of the private sector are also reflected in the public policies developed and applicable at national level.
