Romania mulls imposing a tax on banks' "excessive profits," eyeing approximately RON 1.5 billion.
Updated Article:
Romania's fresh government is looking to impose a short-term tax on what they deem as "over-earned profits" by banks, according to minister of finance, Alexandru Nazare, as cited by Economedia.ro on June 23. This move is anticipated to rake in an additional RON 1.5 billion (USD 324 million) in annual revenue.
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While the draft government program refers to "taxing the over-earned profits of banks for a limited period," it fails to define "over-earned profits" and specifies neither the tax duration nor the exact rate. A 29% rate has been whispers in media reports, yet it is absent from the official ruling document.
Talks are ongoing between the Ministry of Finance, the National Bank of Romania (BNR), and banking sector representatives regarding the potential implications of this tax measure. The absence of clear guidelines suggests that the proposal remains under technical and political negotiation.
Romania's banking sector reported a 5.4% year-on-year rise in aggregate profits in 2024, reaching RON 14.0 billion (EUR 2.8 billion), as per BNR data.
This new tax would be an added burden, joining the "special tax on banks," which was introduced in 2024 and imposes a 2% levy on the turnover of credit institutions. This tax is levied on top of the standard 16% profit tax. In 2024, it contributed RON 967 million to the state budget, with 2025 projections for RON 1.3 billion in revenues from it.
Romania's largest bank by assets, Banca Transilvania, has warned about the authorities' intentions to impose a "tax on banks' over-earned profits for a limited period," according to Economedia.ro.
Omer Tetik, CEO of Banca Transilvania, highlights that any additional taxation will reduce the lending capacity of banks, potentially leading to an economic downturn. Moreover, he asserts that the measure will impact the 8 million Romanians who indirectly own shares in the bank, through private pension funds.
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In-Depth Insights:
- Definition and Scope: The proposed tax targets profits considered as "over-earned" or "excessive," as determined by the government above a particular threshold beyond regular market conditions.
- Duration: Planned for enforcement from 2026, the tax is temporary, though the exact duration has not been explicitly stated in recent news.
- Rate: As of June 2025, the precise rate for the excessive profit tax remains undisclosed.
- Potential Economic Impact: The primary objective is to increase fiscal revenues and lessen budget deficits, as prioritized by the new Romanian government. However, the banking sector has raised concerns about investment and economic growth, as additional taxes may destabilize the financial sector. Moreover, uncertainty and reduced investor confidence can result due to sector-specific taxes combined with other austerity measures such as job cuts in the public sector.
- The prospective tax on banks in Romania, as suggested by the government, aims to target profits deemed as "over-earned" or "excessive," which are profits that exceed a certain threshold within market norms.
- With the planned implementation of this tax in 2026, the banking-and-insurance industry, along with the finance and business sectors, may find an additional strain on their profits, potentially impacting investment and growth prospects as discussed by industry representatives.
