Government approves social security tax cut – sources

The draft bill to cut social security taxes by 5 percent starting with October 1st has was approved by the Romanian Government on Wednesday and is about to be sent to the parliament, according to official sources quoted by Mediafax.

Prime minister Victor Ponta previously said the Government will discuss the project on Wednesday and sent to the parliament to be adopted by the Senate as an emergency and by the deputies at the start of July.

“We’ve discussed the issue with international financial institutions – we are on track to fulfill all our obligations in 2014. We were a better more levelheaded government and we set money aside for this reduction”, Ponta said.

The official believes that there is still work to be done to make sure the measure is sustainable in the long run.

For instance, the PM said on Tuesday that the tax cut for employers could be sustained for 8 years, at a budgetary cost of RON 4.8 billion per year, if the RON 40 billion that insolvent firms owe ANAF could be recovered.

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“We have good news and bad news. The good news is that if we recover the RON 40 billion owed by tax payers currently in insolvency, the social security tax cut could be maintained for 8 years. The bad news is that at this time the Insolvency Code is blocked. If it would pass, there would be no more doubts about CAS sustainability”, the prime-minister said.

The reduction was originally planned for July 1 but was postponed until October and is set to have a RON 850 million impact on the budget.

The social security tax (CAS) cut by 5 percentage points, to 15.8%, would place Romania second in the region in terms of the lowest social security costs, after Slovakia, with 14%, and before Poland, with 16.26%, according to a survey conducted by Accace.