Friday, July 29, 2016
Romania: Cut taxes, regulations and economy improves
Another country that "gets it" is Romania, the mountainous, Central European nation and home to roughly 20 million people. After years of tepid growth, Romania's government moved to revise its tax code. At the end of last year, it reduced the value added tax (VAT) rate from 24 percent to 20 percent, lowered the income withholding tax rate, nixed a controversial "special construction" tax, simplified deductibles and exempted certain dividends from corporate income tax.
The changes have worked much faster than expected.
In the first quarter, Romania grew 4.3 percent year-over-year, beating the 3.9 percent analysts had expected, and up 1.6 percent from the fourth quarter of 2015. This places the country among the fastest growing EU economies, with the European Commission now expecting it to be the second fastest growing country in the 28-member bloc, behind only Ireland.
I am playing this via my investment in closed end fund Fondul Proprietatea. Speaking of Fondul the fund just announced the terms of the tender offer. They are offering about a 9% premium to the current share price and are attempting to tender around 575 million shares which is about 5% of the outstanding shares. I am not going to tender because I like the assets in the fund that are not yet fully valued in my view so I expect the shares to trade higher down the road.