Small and medium-sized businesses, the key to economic stability, are signaling the entry into a serious recession: they are hastily closing more than a hundred thousand part-time contracts.

If the government does not correct the fiscal measures that provoked the crisis, then we can consider not closed labor contracts, but liquidated enterprises.

For small and medium-sized businesses, the consequences of the coronavirus pandemic are not abating. The tense global economic situation with signs of an imminent recession, the intensity of the energy crisis, uncertainty and lack of predictability are realities that are difficult for small companies to overcome. In addition, at the local level, excessive bureaucracy hampers many initiatives.

And last but not least: the increase in interest rates and the tightening of conditions for obtaining loans by banks make it almost impossible to finance current activities. Investments remain a dream, business development a chimera.

Recently, the government launched a package of fiscal measures in an attempt to increase revenue to the budget in order to bring the budget deficit back to optimal limits. The country’s finances are tight, and we understand that. However, for small and medium-sized businesses, the tax measures applied immediately are in fact a strong blow, if not the last, in the context of the many difficulties caused by the superimposition of the crises.

A stream of partial layoffs equivalent to 7% unemployment

CONAF sounded the alarm during the period set aside for discussions on the application of fiscal measures from the summer package launched by the Government. Then we drew attention to the fragility of small and medium-sized businesses, which find it difficult to survive in this difficult year.

The first effects we are seeing confirm our fears: over 100,000 part-time contracts have been closed in the last month. The number of closed part-time contracts is more than a quarter of the number of unemployed in June, i.e. 439,900 people.

Or, if all part-time workers registered as unemployed, unemployment in Romania would rise to nearly 7% overnight. Of course, this is a hypothetical prospect, but it describes the landscape quite clearly: hundreds of thousands of people are at risk of losing their source of income because small and medium-sized companies do not have the money to cover the new tax requirements.

Risk of mass layoffs

Although we do not yet have statistics that describe this phenomenon more clearly, we do have a warning from the business community: more than half of small and medium-sized companies will restructure their accounts and lay off employees.

The perception of employers in various fields of activity indicates a crisis scenario: more than half of entrepreneurs predict a reduction in part-time workers.

The part-time taxation error has been fixed

The idea is not new, it was applied in 2017, during the “fiscal revolution”, which shifted the burden of social contributions to the employee.

Then, as now, the argument for this exercise was the suspicion that some employers were disguising their employment contracts as part-time in order to reduce the tax burden on their employees. And then, as now, the measure is presented in the context of the fight against tax evasion and undeclared work.

But the main difference is that in June 2017, inflation was 0.9% and this year, when the idea of ​​a fiscal package was launched, we expected inflation to be 15.1%.

Almost all small and medium-sized companies this summer calculated how to withstand rising costs and tried to find solutions to support their employees.

Moreover, in the summer of 2017, the economy grew, along with the salaries of state employees.

However, in 2017, entrepreneurs suffered due to the measure of overtaxation of joint ventures. They accused the governors that the measure is not fair game, it is unfair because it forces them to pay additional costs to those that apply to the minimum wage, but the worker does not work full time. At that time, there were also strange situations with zero or even negative net pay, where the amounts withheld were higher than the net amount to be received.

In 2020, excessive taxation of shortened contracts was eliminated, as fiscal measures were found to be disproportionate and ineffective. The state did not earn more even then, although, we insist, there were no crises that would block the business environment.

Entrepreneurs welcomed the repeal of the articles of the Tax Code, which provided that from the income received under a part-time contract, the contribution to health and social insurance at the level of the minimum wage in the economy is withheld. , as a return to normal life.

Without tax benefits, hundreds of thousands of businesses close

It is difficult to assess what the consequences of this event will be in this year, which is extremely difficult, full of unknowns and marked by war on the country’s borders.

Probably, the solution to the problem can be again the cancellation of the articles that establish excessive taxation of partnership.

Until the statistics describe the effects of tax measures in this difficult economic context, we believe that the authorities should take some emergency measures that are absolutely necessary for the survival of small businesses. As during the pandemic, we are asking the government to provide tax relief.

We believe that the legislation should allow small and medium-sized companies to defer the payment of current taxes and, implicitly, not impose penalties.

This measure is necessary because small and medium-sized businesses are a pillar of the stability of the Romanian economy. In addition, as uncertainty deepens in the economy, part-time employment increases as entrepreneurs and workers adapt to new situations. Its advantages are obvious: lower costs, flexibility that meets the changing needs of the staff. For the worker, the part-time program allows them to supplement income that is quickly being eaten away by inflation and more expensive loans, and especially for women, it allows them to also fulfill their family responsibilities.

A final argument in favor of eliminating excessive taxation was recently made by Augustin Zegrean, the former president of the Constitutional Court of Romania, who believes that the measure may be unconstitutional. The former president of the Constitutional Court said on B1TV that Article 56 of the Constitution requires “a fair settlement of the fiscal burden” because “a person who works for two hours cannot be forced to pay the same taxes and fees as a person who works for eight hours.” . “It is (to a certain extent) wrong and of course it will not be applied in this way, I don’t think it will stay that way because, however, justice works in Romania. I think they won’t even have to go to court, I think they’ll understand that they can’t do that,” Zegrean said.

Part-time work is a trend seen during the global Covid 19 pandemic. It is not a fad or an attempt to evade taxes, but it keeps the economy afloat.

N. Red: Christina Kyriac, President of the National Confederation of Women’s Entrepreneurship (CONAF), has a doctorate in economics and extensive experience in management. Christina Kyriak specializes in finance, banking, stock exchanges and insurance, she is a valuer, consultant and financial auditor, bankruptcy lawyer, mediator and international arbitrator in mediation. She is the author of the book “Marea Privatizare” in 2016. Kyriac was vice president of the Office of Public Assets Valorization, where she coordinated the post-privatization and bankruptcy division.