States must learn to tax new consumption patterns, technological innovation and digital labour swiftly and intelligently, as within a few years some taxes and excise duties will have a diminishing budgetary impact, including in Romania, according to an analysis by Frames.
According to analysts, although European countries have steadily increased so-called "sin taxes" over the past two decades, the revenues collected have not grown proportionally and have in fact stagnated or declined in real terms, as public policies have been effective and people are consuming less. The same phenomenon can be observed in fuel excise duties.
"Romania, like many other economies, needs a significant shift in the way it treats taxes and levies paid by the business environment in order to optimise state budget revenues. Beyond digitalisation and reducing tax evasion, the Romanian state must adapt its public policies to new economic realities," the consultancy's analysis shows.
In addition, the accelerated transition to electric and hybrid vehicles has significantly reduced the volume of petrol and diesel sold at the pump. As a result, environmental and consumption taxes, which used to represent a safety net for European governments, are becoming increasingly volatile.
"Traditional taxation models, built for a stable industrial economy, are now showing their limits. In order to remain financially sustainable, all states, including Romania, are almost compelled to adopt highly flexible fiscal regulations and adapt to the new reality. States must learn to tax new consumption behaviours, technological innovation and digital labour rapidly and intelligently. In the coming years, some taxes and excise duties will have an increasingly limited budgetary impact, including in our country," the cited source argues.
In this context, consultants warn that maintaining rigid tax systems will inevitably lead to a state funding crisis, affecting both current expenditure and investment.
A recent analysis by International Monetary Fund expert Christoph Rosenberg proposes that current excise systems be designed to directly reflect the risk level of products (for example, alcohol, sugar or nicotine content), through more precise taxation rather than across-the-board increases in existing rates.
For instance, according to the IMF analysis, as smoking bans expand and consumer preferences shift, alternatives to traditional smoking such as heated tobacco, e-cigarettes or nicotine pouchesare increasingly used by those unable to give up the habit. As many of these new products are less harmful, it is logical that they should be taxed at a lower level, adjustable as states gain access to new data and reassess revenue needs.
The IMF analysis highlights that excise duties are a stable source of revenue (around 2% of GDP in both advanced and developing economies), but their effectiveness declines over time if they are not adjusted to inflation and changing consumption patterns. Therefore, simply increasing rates is not sufficient. Instead, an optimal and up-to-date policy involves aligning tax levels with consumer risk and ensuring international coordination to limit tax evasion and the shift towards untaxed products.
"From alcohol and tobacco to fuels and other excisable goods, there is a need for technical flexibility in taxation methods in order to prevent sharp price increases, consumer migration to cheaper alternatives and, of course, the expansion of the black market," said Adrian Negrescu, manager at Frames, as quoted in the release.
According to the company's consultants, this need for legislative agility is already evident, on a significant scale, in environmental policies. The fight against climate change has effectively forced authorities to invent entirely new financial instruments, with carbon emissions taxation being the most relevant example of dynamic fiscal policy.
"The European Union has understood that a simple fixed tax on a factory smokestack is not enough to stimulate green innovation. Thus, the emissions trading system was created a mechanism in which the price of pollution fluctuates freely based on supply and demand, just like on a stock exchange," Negrescu added.
However, a major challenge emerged at the borders, as European companies, required to pay high costs for their emissions, risked being undercut by cheaper imports from countries without environmental regulations.
The response came in the form of the Carbon Border Adjustment Mechanism. This flexible legislative innovation directly penalises polluting imports, levelling the playing field for all market participants. In effect, Europe has managed to export its fiscal and environmental standards beyond its borders by taxing the carbon footprint of products regardless of where they are manufactured.
On the other hand, major technology and e-commerce companies generate billions of dollars in annual profits in countries where they may not have a single employee or physical office. Outdated legislation, which taxed profits exclusively at a company's headquarters, facilitated a massive shift of capital to tax havens.
To curb this financial outflow, governments have had to demonstrate unprecedented adaptability. Under the coordination of the Organisation for Economic Co-operation and Development, more than 100 countries have agreed to implement a global minimum corporate tax of 15%.
"This landmark agreement reshapes the rules of the game. Digital giants will be taxed proportionally where they generate value, regardless of where they choose to register their headquarters," the analysis states.
In this context, Negrescu said that adopting flexible taxation could help Romania overcome its current budgetary challenges.
"Adopting flexible taxes could help Romania navigate this period of budgetary strain. Consider that interest payments on our country's loans have reached 60 billion lei, equivalent to 3% of GDP. How can we meet deficit targets in the coming years if we continue to sink into debt? The solutions are simple either you reduce spending or you optimise tax revenues. Beyond tackling tax evasion, I believe an optimal solution is to rethink taxation so that it reflects the dynamics of the economy," he added.
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