Romania: Government to adopt fiscal changes despite increasing opposition

Romania’s Government may adopt the recently announced changes to the Fiscal Code on Wednesday, despite increasing opposition to the proposed measures.

Finance minister Ionut Misa said yesterday that he and prime minister Mihai Tudose agreed that the emergency ordinance draft to amend the Fiscal Code would be adopted in Wednesday’s cabinet meeting, reports

The Government was initially supposed to hold a special meeting on Friday to adopt the tax changes but postponed it motivating that the emergency ordinance draft didn’t have all the required internal approvals.

The proposed changes to the Fiscal Code have raised a wave of criticism from workers’ unions, business organizations, and President Klaus Iohannis. The most controversial measure is the transfer of most social contributions from employers to employees, which may leave many employees in Romania with lower net salaries or increase the tax burden for companies. The top business organizations in Romania have rallied against this measure, which has no apparent upside for anyone. However, Social Democratic Party (PSD) leader Liviu Dragnea repeatedly said that both employees and employers would benefit from this measure.

Meanwhile, the Fiscal Council has warned that the announced fiscal measures would lead to lower budget revenues. President Klaus Iohannis said yesterday that implementing these measures starting January 1, 2018, is “totally untimely” and that the Government should postpone them until their impact is thoroughly analyzed. Even Bucharest mayor Gabriela Firea, an important leader of the governing party, criticized some of the tax changes, which may leave the local authorities with less money.

The Government wants to cut the tax on individual income from 16% to 10% in addition to the social contribution transfer, starting January 1, 2018. This would affect the cities’ budgets as about half of their revenues come from the income tax paid by their citizens, mayors explained. They asked PM Mihai Tudose to find ways to compensate for the lost revenues. Tudose promised them to find a solution and even suggested that the social contribution transfer may not even be discussed in Wednesday’s cabinet meeting.


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