The Government considers the option of lowering the flat tax from 16 percent to 12 percent and social security contributions to 41 percent from the current 44 percent as well as increasing the minimum wage to RON 700 from RON 600, according to Democrat-Liberal Party (PDL) sources cited by Mediafax newswire. These are some of the issues that are believed to be discussed with IMF representatives who will arrive in Bucharest tomorrow.
Many economic analysts however, consider that if such tax cuts are considered sustainable, the flat tax reduction should not be the priority but rather reducing the burden of labor costs. This opinion is also shared by President Traian Basescu who said this Sunday that the flat tax reduction is not a solution and the Government should concentrate on lowering social security contributions.
According to PDL estimations the budgetary loss (around EUR 2.2 billion) is to be sustained either by setting a higher budget deficit target (4.8 percent from the 4.4 percent negotiated with the IMF), or by maintaining the target and reducing investments.
Speaking at the Tax & Law – New fiscal measures: effects and consequences event, organized by Business Review last week, Andreea Paul Vass, personal counselor of Prime Minister Emil Boc, confirmed that currently there is a lot of pressure from the PDL to reduce the flat tax to 10-12 percent.
Simona Bazavan