Romania’s government to keep flat tax of 16 percent

Newsroom 31/10/2013 | 15:34

PM Victor Ponta said on Thursday Romania will maintain its flat corporate tax as this one of the decisions of the ruling coalition USL, adding a progressive taxation mechanism is out of question for the moment, reports Mediafax newswire.

The PM was asked if he favored a differentiated tax of 16, 18 and 20 percent.

“At present, no. In principle, like any social-democrat, although the progressive tax exists in Germany, and Mrs. Merkel is not a social democrat, or in Britain, – in general, I back the idea, the principle, but we have struck a clear political deal upon the formation of the USL, of maintaining the flat tax, and the flat tax remains at 16 percent,” said Ponta.

The government aims to further expand the taxable base and crack down of tax evasion in the face of falling revenues to the state budget.

According to media reports, some of the policy makers have suggested bringing VAT and the corporate tax rate to 22 percent, although government officials said this one just of the scenarios on the table of the PM.

Daniel Chitoiu, the finance minister and a member of the right wing party USL, said his party would break the USL alliance if the flat tax rate is hiked next year.

Romania’s flat tax rate of 16 percent, which applies for both companies and individuals, was enforced in 2005. It has been touted as one of the major fiscal changes that generated large inflows of foreign direct investments to Romania.