· romania
Chattanooga Choo Choo (ciuciu), Romanian style or How to Kill a Good Business in Two Steps
Romania's IT boom, fueled by tax breaks, is threatened. Austerity measures ("Chattanooga Choo Choo") and global downturn have decimated IT jobs. I fear this will discourage future talent, crippling our economy. We need innovation, not short-sighted politics.
"Chattanooga Choo Choo" is a song performed by Glenn Miller and His Orchestra for the first time in 1941. If you are unfamiliar with this great band, I encourage you to listen to their music. You might be surprised to recognize many of the hits they performed over the years. By the way, the Glenn Miller Orchestra is still active, performing and touring around the globe.
The song, a foxtrot, was featured in the movie Sun Valley Serenade, which starred the Norwegian world-class skater and three-time Olympic champion Sonja Henie.
Over the years, the song has become a Tennessee state symbol of positive transformation, rich history, and cultural significance. It represents the contributions of important artists born in the city, making Chattanooga one of the most renowned cities in the USA.
Well, what does this have to do with Romania and its IT market?
Toward the end of last year, in 2024, the Romanian Government introduced a set of austerity measures informally called the Train (Trenulet) Ordinance. Beyond the train symbol, the homophony between the sound of a train in English—"Choo Choo"—and the Romanian ciuciu (a colloquial term and gesture meaning "nothing, nada, zero, zip") inspired the title of my post today. Essentially, the Romanian Chattanooga train carries an opposite meaning to its American counterpart.
The restrictive measures outlined in the ordinance affect retirees, government employees including the Police, students, small and medium businesses, and key sectors of the Romanian economy, such as hospitality, construction, and IT. Among several new taxation rules, one significantly impacts the IT labor market: employees in the IT sector earning gross salaries below 10,000 RON (€2,000) are no longer exempt from income tax. They are now required to pay the tax in full, which makes a monthly impact of €130–230.
This marks the second step in the complete removal of the income tax exemption for IT professionals. I believe it signals the end of an incredibly successful chapter in the Romanian IT industry.
This chapter started in 2001 when Adrian Nastase, a Social Democrat Prime Minister, introduced the exemption. It continued between 2004-2014 with the support of the President Basescu for the IT sector when other politicians wanted to remove it. In 2012 the Romanian Government issued the 797 Decision as a support package for companies which are creating IT jobs and keep them for at least five years. More than 30 companies benefitted from this incentive scheme which gave another nice boost to the industry. All these decisions and investments made by the Romanian Government brought the IT industry where it stands today, somewhere between 7-8% of the PIB which in fact counts for around 14%-15% considering indirect effects. Additionally, the sector has created high salaries, excellent up-to-date skills, and valuable knowledge. In other words, it provided good jobs for smart, educated individuals, particularly the younger generation. Choosing a successful career in IT encouraged many of them to remain in Romania rather than emigrate.
Over the last decade, however, there have been increasing voices opposing the tax exemption, including EU regulations concerning tax reliefs. Thanks to pressure from organizations like AmCham, ANIS, from the industry itself, and backing from some politicians, the IT tax relaxation persisted. However, under another Social Democrat, Prime Minister Ciolacu, the exemption was removed in two steps, as I explained earlier.
I met Prime Minister Ciolacu face-to-face in September 2023 as a representative of IBM Romania. He had just returned from Brussels, where he began negotiating a long-term solution to address Romania’s budget deficit. He told us that Romania was facing serious financial challenges because its institutions were unable to collect a significant portion of taxes. He pointed out that one of the main issues was the lack of efficient IT systems, which he intended to revolutionize.
It was clear that he understood the situation very well at that time, but 2024 was approaching—an election year accompanied by even more spending. In fact, the government was spending as if there were no tomorrow. EU officials had urged him to increase VAT, but he refused, as he continues to do today. He argued that such a move would have a negative impact on those at the bottom of the economic ladder, particularly people with low incomes.
I am not an expert, but he is probably right, as VAT is ultimately paid by the final consumer.
Bottom line, he kept the VAT at 19% and, in compensation, offered the EU bureaucrats the IT sector tax exemptions along with a few other promises—though not many were kept, as we discovered at the end of 2024 with a new set of measures shaking the Romanian economy and bringing again people in the streets.
The first step he took was to remove the income tax exemption for salaries over 10,000 RON, effectively reducing income by 10%. This change occurred exactly one year ago. The market reaction was, I would say, unexpectedly mild. Only a few companies compensated for the difference, and not many IT seniors left their jobs for other local or international opportunities. Few even emigrated.
Unfortunately, the IT sector was hit by a perfect storm in 2024. Following the removal of the income tax exemption, demand decreased significantly. Trusted sources report that the number of IT job offers in Romania dropped by 20–25% during 2024. The reasons were twofold: the state of the global economy, which led to widespread spending cuts, and the AI "fever," which prompted large companies to reduce or halt hiring—some even resorting to layoffs.
As I have mentioned in previous posts, towards the end of last year I was working with recruiters to find IT seniors in the Romanian market, and it has become increasingly easy to do so. Moreover, candidates are now more flexible regarding employment conditions. I initially considered this a positive development—for a while.
Now, I am concerned—not necessarily about what is happening tomorrow, but about the future of the IT sector in Romania.
I believed it was a good thing that the Romanian IT market had reached maturity, that the tax exemption had served its purpose, and that we could now move forward without it. However, I never imagined that demand would slow down so sharply during 2024 or that the next step in reversing the tax exemption would be implemented within just one year.
Many of us expected the second step to come no earlier than 2028, with the government using other tools in the meantime to address the budget deficit. It seems we were overly optimistic, assuming that our politicians were also considering the long-term future of our industry. A poor assumption, indeed.
My fear is that the second step taken by the Government against the IT sector with the Romanian "Chattanooga Choo Choo" (spelled ciuciu) has all the ingredients to diminish young people's interest in pursuing an IT career.
First of all, incomes have suddenly dropped. Second, the IT sector was once perceived as the proverbial "golden goose," somehow protected even by politicians. That perception has now ended. We are left to weather the winds—strong and gusty ones, especially for juniors earning less than 10,000 RON, as demand for their skills is at its lowest level since the development of the IT market began. Lower incomes combined with difficulty finding decent jobs—why would anyone chase such a career?
The repercussions will not be visible in a month or two, or even a year or two, but in several years. With fewer IT graduates, we will face an immense lack of IT skills in the economy when they will be needed the most. The billions currently generated by IT services exports will diminish dramatically.
Many other countries are facing similar challenges today for exactly this reason: they failed to invest in the IT sector at the right moment. Young people were not encouraged or incentivized to pursue careers in IT, and the consequences are clear. Their economy suffers.
Clearly, politicians have short memories and fail to learn from their mistakes. They act more in line with the saying attributed to Louis XV (or Madame de Pompadour, according to some): “Après moi/nous, le déluge” – After me/us, the flood.
If the French aristocracy verbalized this attitude, Romanian politicians have perfected it. Just look at the situation surrounding the last Romanian elections.
Now, it is all about the reaction and resilience of Romanian IT entrepreneurs. They need to focus more on innovation, automation, and products—perhaps even R&D—rather than outsourcing services. There are a lot of money waiting to be spent by investors. I know it is easier said than done, but they - the entrepreneurs, are the only ones capable of keeping the IT flame burning high. Our politicians let us down when we needed them most. Once again.
In the same time the IT practitioners should enhance their skills adding strong knowledge and certifications in at least two mandatory areas: Cloud computing if possible for all three major players - AWS, Azure and GCP; IBM Cloud and Oracle Cloud Infrastructure might be a plus sometimes, and second, of course, the hands on experience using AI about which we all, IT services providers and clients, are fond of. No sarcasm intended, well, maybe just a little!
PS. While our politicians are making questionable decisions that will negatively affect Romania's economy and future, across the Atlantic, the elected President has appointed a billionaire businessman — a charismatic market manipulator called already by his fellow Americans, the co-president—as a key adviser and important member of his government. Is this the end of the traditional politician prototype as we know it?
Considering what is happening in the political arena in many countries, including Romania, I would say it might be. Or perhaps all politicians will eventually be replaced by AI. Time will tell.
