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  • Romania, 7th place in CEE after the number of companies targeted by tax inspections

    Romania, 7th place in CEE after the number of companies targeted by tax inspections

    Over 22% of companies in Romania were targeted by tax inspections in 2018, almost three times higher than in 2017 or 2016, but below the average in Central and Eastern Europe of 32%, according to a survey of PwC Tax Controversy & Dispute Resolution (TCDR) network in Central and Eastern Europe.

    Thus, Romania ranks 7th in the region, the first places being occupied by Bosnia and Herzegovina (63%), Bulgaria (48%), Poland (48%) and the Czech Republic (35%). Both in Romania and in the other Central and Eastern European countries, most tax inspections concerned the corporate income tax and the VAT. In Romania, the inspections verified in 45% of cases aspects of the corporate income tax, above the regional average of 34%, and 36% targeted the VAT, compared with 27% at the CEE level.

    “In this survey, we aimed to identify local trends in tax inspections area compared to those in other states in the region as we find it extremely important to observe how this important component of tax administration evolves in our region. Although there are some differences from the perspective of the fiscal, administrative and judicial systems, the countries in this region have enough commonalities in the practical evolution, during the last 30 years, and the results are extremely interesting”, said Dan Dascălu, Partner D&B David and Baias, leader of the PwC TCDR network in CEE.

    The survey shows that 40% of the tax inspections in Romania were completed in no more than 3 months, compared to 47% in the region. States that have reported comparable periods include Bosnia and Herzegovina, Latvia and Lithuania.

    “We found that the inspectors’ approaches are similar in most countries, the areas of interest being the same. For example, in the case of corporate income tax, the most frequently verified issues are related to intra-group transactions, services deductibility and transfer pricing, and in the case of VAT, the most common cases refer to deductions. Also, the duration of the inspections, as well as their implications, including from the perspective of challenging the tax documents, have many points in common, which can be a starting point in the ANAF – taxpayers dialogue, in order to improve the relationship between them, including by relating to other CEE states experiences”, explained Dan Dascălu.

    Regarding the additional liabilities assessed by tax inspection authorities, in most of the cases the amounts were up to EUR 100,000, respectively 43% of the respondents in Romania and 51% in Central and Eastern Europe. At the other extreme, the survey highlighted that 18% of inspections led to taxation between EUR 1 million and EUR 5 million in Romania, compared with the European average of 5%.

    Over half of the respondents in Romania (55%) choose not to object against the taxing acts issued following tax inspections, in CEE the percentage being 62%.

    The main reasons for the respondents not to object against the conclusions of the tax inspection was the acceptance of the tax inspection findings, the small number of findings and distrust in the effectiveness of the challenge.

    Where businesses objected against the tax inspection findings, in 37% of the cases the appeal was totally rejected in Romania and 42% in CEE, while 28% of the Romanian companies obtained a fully or partly successful solution, compared to an average of 38% in the region.

  • The next generation of family business owners believes in businesses digitization

    The next generation of family business owners believes in businesses digitization

    The next generation family business owners in Central and Eastern Europewants to bring value to their companies by implementing a digitization strategy, according to PwC NextGen Survey 2019 undertaken in Romania, Russia, Poland, Bulgaria and Albania.

    So, almost 90% of the respondents wants to capitalize their digital know-how to develop a strategy fit for the digital age. The most relevant emerging technologies cited for the future of their companies are the Internet of Things (82%) and Robotics (57%), closely followed by Artificial Intelligence (54%).

    ”The next generation is truly digital native and see the digital technology as crucial for the success of their companies. That’s why they want to use their digital know-how to help their companies adapt to the digital age and perform. For example, 30% of respondents, especially from industry sector, are concerned that their family business is currently behind its peers in this area”, said Ionuț Sas, PwC România Partner and Entrepreneurial & Private Business Leader.

    The next generation of family business owners is concerned  about the changing customer needs (26%), the impact of changing technology (22%) and the market competition (19%). The main business priorities are professionalising and modernising the management practices of their companies (97%), focus on talent (90% say change is needed around talent attraction and retention; 86% say this about upskilling staff).

    Currently, 53% of them are actively involved in the activities of their companies, below the global average (70%), but engagement is growing, rising to 76% in the future. By 2025, 47% expect to have Executive Director roles, and 33% expect to be majority shareholders.

    Conclusions of the PwC NextGen Survey 2019

    • 37% of Next Gen in Central and Eastern Europe have been given the opportunity to lead a specific change project.
    • 23% are executive directors today; 47% expect to be by 2025 (which exceeds the global average of 41%)
    • 20% are majority shareholders today, 33% expect to be by 2025.
    • In terms of key skills that the next generation of business owners feel are essential for their ability to lead their companies in the future are problem solving and strategic thinking (73%), leadership (73%) and communication skills (60%)
    • 90% invest in their education.

  • 25% of Romanian companies consider importing employees

    A quarter of the companies that participated in the PayWell 2019 survey conducted by PwC Romania are considering workforce import to cover the shortage of employees, in particular in low skilled and seasonal workers.

    Companies that have expressed this intention come mainly from sectors such as hotels and restaurants, construction or agriculture. A similar trend has appeared, according to the survey, in business process solution and IT&C services. Romania is facing an acute workforce shortage, especially in the mentioned sectors, as a result of migration, demographic problems or the education system in the last decades. According to PwC estimates, an additional 1 million employees are needed to support 3.5% growth by 2022.

    “The import of the workforce can be a temporary solution for some sectors. In the medium and long term, however, companies should focus on the adoption and implementation of education and development programs for employees’ skills, especially digital ones, given that over the next decade, the automation and artificial intelligence will replace most of the jobs that involve repetitive activities. Innovation and digitization will help streamline processes, and demand for less-skilled employees will decrease, especially in sectors such as agriculture or manufacturing, where jobs are most likely to be replaced”, said Ionuț Sas, Partner and People & Organization Leader PwC Romania.

    Approximately 600,000 jobs in Romania will be affected by the digital transformation generated by the new technologies, according to the PwC Workforce Disruption Index study. Of these, 275,000 could be replaced by automation.

    Although companies say they find it hard to hire, Romania has one of the largest shares of the inactive population in the European Union, according to Paywell 2019.

    „At the same time we are facing a paradoxical situation: we have one of the lowest unemployment rates in the European Union, of 3.2%, the lowest in the last 30 years, but we have the third highest level of inactive population between Member States. The causes are diverse and many of them are related to the structure of the economy because there are regions of the country where employment opportunities are very low or inexistent. Some companies have implemented education or training programs in these areas. Such an approach would contribute to the use of the existing human potential”, said Oana Munteanu, Senior Manager, People & Organization PwC Romania.

    Excluding retirees and the population over 15 years of age who are in education, over 1.1 million people are theoretically available to be employed.

  • The gross wages in private sector increased by an average of 9.4% in 2019

    The gross wages in private companies increased by an average of 9.4% in 2019, according to PayWell Salary and Benefits Survey conducted by PwC Romania.

    The salary increase reported for 2019 exceeds the level of 4.6% estimated for this year by the respondent companies in the previous edition. For 2020, private companies are estimating a 5.7% average gross wage increase.

    The highest average wage growth in 2019, of 14%, was recorded for the hotel sector. Also, increases over the average of all sectors included in the survey were reported by industry + 11%, leasing +10% and retail +10%. According to Paywell 2019, the average gross salary among respondent companies rose to RON 5,941 from RON 5,428 in 2018.

    In terms of staff categories, continues the tendency to increase at a faster rate of wages among unskilled or low-skilled personnel (workers, operators), on average 10%.

    Compared to the previous years, however, when salaries at the managerial levels stagnated, in 2019 the operational management positions increased by 13% and the top management positions by 9%. At the opposite, with 5%, there are administrative staff, technicians and employees with little experience.

    „We note that the wage increase in 2019 was higher than the level predicted by the companies included in Paywell last year, being influenced mainly by the workforce shortage, but also by the evolution in the public sector and by the government decisions regarding the minimum wage. As a result of the cumulative increases of about 50% that have been taken place in the public sector since 2017, the ratio between PayWell average income, representing mostly medium & large companies, and national average income has dropped from 1.4 to 1,16 during this period. In this context, private companies face a double pressure: on the part of the public sector, which has become much more attractive for the employees and the workforce shortage that has intensified in recent years”, said Daniel Anghel, Leader of the Tax and Legal Department, PwC Romania.

    In terms of benefits, meal tickets, annual leave days and special occasion bonus continue to be top. However, compared to previous years, the biggest increases in popularity were recorded by time management (flex time, work from home) and benefits related to the well-being of employees (bookstore, health programs, etc.).

    Other conclusions of the PwC study

    • Top average gross salaries in 2019 by function were in Strategy – RON 12.220, followed by Legal – RON 11.026 and IT – RON 10.769.
    • Bucharest continues to lead the earnings top, with average salary almost double as compared to Muntenia.
    • At county level, the top five Paywell are Bucharest-Ilfov, Timis, Cluj, Brasov and Iasi.
    • The largest wage increases in 2020 are estimated for retail, of 7.42%, the pharmaceutical sector, 6.3%, and banking, 4.73%.

  • Illnesses caused by people’s behaviours, suffocate healthcare budgets

    The increase in illnesses caused by people’s way of life, influenced by factors such as social isolation, income inequality, poor nutrition and pollution, could suffocate public and private healthcare budgets globally, according to the global survey Social Determinants of Health, made by PwC Health Research Institute.

    „80% of a person’s health is attributable to health behaviours, the physical environment and socioeconomic conditions, according to the survey. The forecasts are worrying: by 2025, the OECD projects that many countries will see obesity and overweight rates exceeding 68% of the population and that makes people more prone to a slew of chronic health problems including diabetes, cardiovascular diseases and even cancers”, said Ruxandra Târlescu, Partener PwC România.

    Countries have been spending more on healthcare every year, USD 8.4 trillion across the globe. Addressing social determinants of health is urgent, and employers, authorities, pharmaceutical companies, insurers and physicians must find solutions that impact both people’s lives and budgets.

    In some states are taking shape strategies that can be replicated worldwide, such as: prevention programs based on digital applications for monitoring the state of health or diseases evolution, health outcomes–based contracts between authorities and pharmaceutical companies or social programs for connecting patients with the same diseases.

    The main conclusions of the PwC survey

    • 57% of consumers surveyed said their doctor had never discussed the important social factors affecting their health.
    • one in five respondents indicated they could not afford a healthy lifestyle, and a
    • 20% said they did not have the time to focus on healthy behaviours
    • 35% are not getting enough sleep at night, because working multiple jobs, caring for family members, lacking proper housing, suffering from stress.
    • 26% think that too much time spent using mobile phones and social media) affects the way they live.
    • The investments already made in healthcare, countries have not been able to bring about the necessary societal shifts to encourage habits that could prevent chronic conditions from developing. Between 1990 and 2010 in the OECD, for example, smoking rates dropped 31%. But alcohol use fell only 8%, and the rate of daily vegetable consumption increased by just 2%.
    • Half of global biopharmaceutical executives surveyed by HRI in February 2019 said traditional drug pricing practices were unsustainable, and 90% said the healthcare system would be challenged to afford the next wave of innovative medicines.
    • Some states are experiencing health outcomes–based contracts that links the price with the treatment results on patients. In these cases, drug companies have more of a stake in making sure patients are able to take all their medications as prescribed and they have healthy behaviours. Otherwise, the companies must repay part of the costs.
    • Patient monitoring using Artificial Intelligence applications installed on smartphones or smart watches is a trend that can help healthcare systems.

    PwC’s Health Research Institute (HRI) conducted a global survey in June 2019 of 8,000 people in eight territories, along with interviews of healthcare organisations leaders and an analysis of more than 20 case studies,

  • PwC will invest USD 3 billion in upskilling its employees

    The new technologies will affect, annually, between 5 and 10% of the jobs of each organization and will generate discrepancies between the existing and the necessary skills, according to PwC global estimates.

    In this context, PwC has launched a program to improve the digital skills of the 276,000 employees worldwide, as well as to develop new technologies to support companies and communities in the digital transformation process.

    „As our clients face increasing challenges and opportunities driven by technological advances, stakeholder expectations and other changes, they require us to work together across the broad range of our operations helping them to deal with issues such as cyber security, trust, regulation and strategic workforce planning. The skills gap is an issue that goes to the heart of our purpose and we have the scale and experience to make a measurable impact. That’s why today we are launching ‘New world, New skills”, said Bob Moritz, PwC’s Global Chairman.

    Over the next four years, we are committing $3bn in upskilling – primarily in training our people but also in developing and sharing technologies to support clients and communities.

    New world, New skills focuses on:

    • Upskilling all of PwC’s 276,000 people in areas like data analytics, robotics process automation and artificial intelligence for use in their work and also to advise clients, communities, and other stakeholders in the process of adopting new technologies.
    • Advising our clients on the challenges posed by rapid technological change and automation. This includes identifying skills gaps and mismatches against likely future needs, workforce planning, upskilling programs and cultural change.
    • Work with governments, institutions and teachers for developing programs to help millions of people improve their digital skills, including among those populations most ‘at risk’.

    According to PwC Upskilling Hopes and Fears, 53% of the employees worldwide feel threatened by automation and 77% want to learn new digital skills.

    Over 60% are positive about the impact of technology on their day-to-day work, but only one-third are offered opportunities to develop digital skills outside the daily work.

  • Most automakers disappointed by smart cars profits

    The auto industry invested many billions of dollars to design and develop vehicles for connected, autonomous, shared and electrified (or, in industry parlance, CASE) mobility, but they have been disappointed by the profits from these investments, according to PwC global Automotive trends 2019 report.

    In this context, the auto industry must find a way to balance accelerating innovation and financial survival, until the direction of development becomes clearer.

    “Connected cars are already ubiquitous and electric cars are gaining in popularity, but autonomous and shared vehicles are still a futuristic bet. Most of the automakers who based their strategies on the idea that a revolutionary change in the automobile and invested billion of dollars in the past decade have been disappointed by the profits even when their expectations were conservative. It is impossible to predict precisely what types of vehicles will be leading the market a decade from now. That’s why, they shouldn’t abandon their long-term strategies for CASE, but they should temper them with short-term realism, especially when the pressure comes from the need to process automation and robotization”, said Daniel Anghel, Partner and TLS Leader PwC Romania.

    The main conclusions of the PwC report

    During the next ten years and beyond automakers will be compelled to corral factory costs, primarily because the fulsome research and development and M&A outlays they made in order to design and develop entirely new kinds of automobiles could cut deeply into potential profits. As a result, the role of robotics and automation in factories will rise exponentially.

    The pressure on cost reduction and automation will will likely slash the global auto industry workforce at least in half by 2030. Moreover, there is likely to be further consolidation before the direction of the auto industry becomes clearer. Today, there are more than 20 global automakers; by 2025, there may be only half that number.

    PwC realized three scenarios for the auto industry in 2023, in which the market value will reach the same value of USD 2.6 trillion, from USD 2.2 trillion in 2018, only that the profit margins are different.

    In the first scenario, the electric vehicle development is fast-paced and the margins are 4-4,4%. In the second scenario automakers delay investment, cutting their current electric vehicle production plans by about half and the margins will be 5,1–5,5%. In the third scenario that represents a future with difficult market conditions and big investments, the margins will be 3-3.4%.

    Other conclusions of the report

    • Successful approaches should involve the same overarching principles: a more specialised portfolio, a more focused value proposition, more rigorous financial management, and more willingness to collaborate with other companies, particularly in CASE-oriented innovation and capital investment.
    • Following automation and robotization, companies will have to change their recruitment policies.
    • The number of required data engineers will expand by 80% or more in some automobile factories, while the number of software engineers needed will expand by as much as 90%.
    • The time required between R&D and the point of production could shrink from three to five years today down to two years or so, in order to keep pace with technological and design changes.
    • The auto factories of the future will fall into two categories: one will be a highly automated ‘plug and play’ plant producing large volumes of cars with minimal variations among vehicle types for the discount arena; the other will produce customized, premium vehicles — including, but not limited to, those for the combustion engine, electric and autonomous markets.
    • Investment in innovation and product introduction is projected to continue to rise an estimated 59% through 2023, with the fastest growth by far in electric and autonomous vehicles.
    • The development of CASE vehicles will be more profitable for companies that make sensors, batteries, propulsion software, and infotainment and connectivity programes.
    • The time until autonomous cars will run in large numbers on the roads became difficult to estimate.

  • 53% of the employees worldwide feel threatened by automation

    More than half of global employees feel threatened by automation and believe that will significantly change or make their job obsolete within the next ten years, according to PwC Upskilling Hopes and Fears research. They also feel that their current employers could be doing more to help them acquire new digital skills

    The majority, 61%, were positive about the impact of technology on their day-to-day work, and 77% of people would learn new skills now or completely retrain to improve their future employability. 

    ”In Central & Eastern Europe we see that people are increasingly aware that technology and automation are going to significantly change the labour market and that their jobs are going to be impacted. At PwC, we have embarked on an ambitious digital upskilling initiative across CEE, not just for the PwC professionals, but also working with our clients and stakeholders to advance this important issue across the territories of our region”, said Nick Kós, CEO of PwC Central & Eastern Europe.

    The research was carried out on over 22,000 adults from 11 countries: Australia, China, France, Germany, India, Netherlands, Poland, Singapore, South Africa, the UK and the US), starting from PwC research showing that 30% of jobs are at risk from automation by the mid-2030s.  Meanwhile, PwC’s 2019 annual CEO survey shows that the availability of skills is a top concern for 79% of CEOs.

    “The technology will contribute to the disappearance of some jobs and, at the same time, to the creation of new ones that will need increased digital skills. The transformation of the economy and the labor market due to technology will affect both employees and employers. For this reason, companies and authorities must show openness, adapt to change and, of course, invest in education and training to get the most benefit from this process,” said Ionuț Simion, Country Managing Partner PwC Romania.

    77% of the employees worldwide want to learn new digital skills

    • The opportunities and attitudes vary significantly by an individual’s level of education, location, gender and age.
    • Over a third (34%) of adults without school education or training beyond school say they are not learning any new digital skills compared with just 17% of college graduates
    • Men are more likely than women to think that technology will have a positive impact on their jobs are also more likely to be learning new skills (80% of the men surveyed say they are doing so versus 74% of women). 
    • 69% of 18-34 year olds feel positively about the future impact of technology on their jobs compared with 59% of 35-54 year olds, and 50% of those aged 55+.