Romanian business sector faces a period of uncertainty

Romanian business sector faces a period of uncertainty

MCR Interview: Roberto Falato, Managing Partner, Boscolo & Partners, member of Crowe Horwath International

Q: As a Tax Advisor, how was 2017 for you and what are the perspectives for 2018?


Roberto Falato: Being an optimist by nature I am always trying to see the positive side of things in both past events and future perspectives. 2017 has been a year of recovery for the European economy, but especially for the Romanian one. Our activity is increasing at the hand of various factors, some positive and some less so. Part of our growth is actually determined by the clients’ acknowledgement of the importance of advisory and high quality services. In some of the matters, like international taxation, much more attention is required. This is why we have registered growth in Transfer Pricing activity, cross-border VAT operations and expats regime. Special attention must be given to these matters due to the risk of them generating tax litigation. It may be that there is a negative side to our increasing work, determined by newly introduced bureaucracy elements in the EU and local taxation. These may obligate the consultant to assume them as a cost since the client is not always aware of the necessity of paying the service. Our perspectives for 2018 include increasing the activity on restructuring the economic reality, a subject that the market prefers to M&A, for example.


Q: How was 2017 for Boscolo & Partners?


Roberto Falato: It was a satisfying year. Even though not having a two digit increase, like in the 2000s, it had a positive trend. The most important evolution was in those departments that benefit from our entrance in Crowe Horwath network. I am referring to the audit activity especially, which despite the market’s difficulties, records increasing revenues. The Crowe Horwath brand, with its quality guarantee and strong experience is now bringing access to areas in the market that were difficult to reach before.


Q: Since October 2016 you have been the official representative for Romania of Crowe Horwath International. How was the first year of collaboration comparing to your expectations?


Roberto Falato: As predicted, our entrance in the Crowe Horwath network has been satisfying and a reason of great pride. There have been 12 months since the nomination of Boscolo & Partners as a member of Crowe Horwath International in Romania. The network is continuously developing worldwide and in 2016 it has been ranked as 8th in top, with 3.7 billion in revenues. The ambition to grow further prompted the network to identify subjects according to each country’s expectations; Boscolo & Partners entered right in this context. If for ranking (we are no. 7 nationally) as also for quality and structure, being present also in Cluj - Napoca and Timisoara, besides Bucharest headquarters, with a total number of 90 employees. At the moment of members’ selection, there were no other companies to accomplish their high requirements and expectations. After one year of membership we can say that we are very much satisfied with our relationship with the dynamic and efficient network. For us it is a great opportunity for professional and personal development.


Q: If you were to associate 2017 with another year, in terms of taxes, what year would you choose and why?


Roberto Falato: It is difficult to compare different years from a tax point of view.

Each year is different from the other. Each year follows a certain economic situation and more than that, the political situation of the country.

Looking back, the tax system has suffered many changes over the time, mostly regarding the fiscal sustainability of the public sector. Indeed, 2017 could be considered the year with a major impact on the taxpayers’ business, especially when we take in consideration the lack of fiscal predictability, and relaxation. There is a big concern regarding the impact of the measures taken by the government during this year, which are prepared to enter into force in 2018 will affect the Romanian business sector in the future. However, getting back to your question, I would not associate 2017 with any year, at least not one after Romania’s accession to EU.





Q: From your 2017 experience, what were the most dynamic sectors of the economy, since Boscolo & Partners serves over 300 clients in the industry, services, building and infrastructure, trade, real estate and banking?  


Roberto Falato: The growth of domestic purchasing power caused by the constant increase of salaries has certainly affected the industry and I fear it may also affect it in the near future, but it has increased the interest of major players and brands in trading. The infrastructure, even though it never gave the impression of really taking off, is definitely a growing industry with good perspectives. The traditional industry is defending itself even if it risks losing competitiveness because of expansionary wage policy and the lack of manpower.


Q: How do you explain your clients what is happening in the Romanian fiscal system?


Roberto Falato: Given the economic context and the frequent changes in the Romanian fiscal system, it’s quite a challenge to keep up with all measures taken during this year. We do our best to always be a step ahead and provide our clients with legislative updates and solutions custom made to their own business. At this moment, the Romanian business sector faces a period of uncertainty as a consequence of the large volume of amendments in legislation, which has been amended several times so far. This lack of predictability of what the new measures will look like in their final version and how they will apply, or even whether other amendments may appear, has worsened the tax system. Our job, and maybe better said, our scope is to provide our clients with solutions and support through this period of changes.


Q: What’s your biggest fear for 2018 and what is ‘’the thing’’ that you are sure you can count on next year in your sector?


Roberto Falato: As I said earlier, the biggest concern is bureaucracy. Bureaucracy can make competitivity extinct in a country. For the consultant, bureaucracy means not focusing on the core business, which we should not forget, is about assisting clients grow, not employing resources to meet the continuing demands of AF to provide data and information that is often already at its disposal.

We can count on the fact that the obligation of paying taxes is one of the few things of which we are certain of (it is to quote someone, like death!) and then our work will also be required in the future.




Q: What’s your view on employment, trade and investment for Romania in 2018 and please give us your opinion about the evolution of your business sector for the year to come.


Roberto Falato: The lack of manpower is one of the elements of greatest concern for the local economy. I think immediate intervention is needed at a political and regulatory level. There must be found ways of facilitating and encouraging the return of Romanians form overseas. Alternatively, a greater opening and policy to the entry of workers from non-EU countries. This aspect will dictate foreign investments. Investors need clear answers for long-term plans, otherwise they will turn their investment to other competitive countries. As for local investment, I believe it should be focused on areas with the greatest potential for maximum efficiency. I hope there will be large investments in the field of infrastructure and some other strategic industries.


Q: Probably the major visible crisis in Romania now is related to the workforce scarcity, that adds to a high competition between companies. How would you describe both sides (the competition between companies in your sector and the competition for the high skilled workforce)?


Roberto Falato: Unfortunately, we are all suffering because of the lack of manpower. Qualified or not. We feel the consequences in our sector. I must say that the competition mainly comes from companies outside our domain who can afford to offer better conditions for employees, who acquire people trained by us with considerable effort and investment.


Q: Boscolo & Partners was established in Romania more than 20 years ago. If you were to go back 20 years, what would be your statement on ‘’Romania - then and now’’?


Roberto Falato: It would be too easy to say that Romania has completely changed in 20 years. There were not so many mistakes or missed opportunities, the country has grown and improved in all aspects. It used to be a country with good prospects and almost everything could be accomplished. Now it is a mature country that joined EU and that can have its say at the international level. Now it must take a step forward to consolidate its position, while facing a constant challenge to remain competitive, much similar to ours.