Concerns regarding budget revenues
The Fiscal Code might be amended at the end of a public debate
Daniela Budu, 23.05.2022, 14:00
The Finance Ministry in Bucharest is considering a possible amendment of the Fiscal Code, after PSD and PNL in the ruling coalition agreed to improve revenue collection by reconfiguring the current fiscal framework. The Social-Democrats support a gradual rollback to progressive taxation, whereas the Liberals support the flat tax, which they are unwilling to give up. What is certain is that both parties said there wont be additional taxes introduced. Prime Minister Nicolae Ciucă says the Liberals support the flat tax, as stipulated in the governing program.
“This year we wont modify the taxation system, rather we will try to streamline it. I dont believe the timing is right to speak about new taxes, considering the current state of affair.”
In turn, PSD leader Marcel Ciolacu gave assurances that there wont be any increases in taxes, supporting instead a gradual return to progressive taxation, similar to other systems in Western Europe.
“Theres wont be any new taxes. We will try to optimize the taxing system within two weeks at the most. The Finance Minister will make propositions and submit analyses, especially from external financial auditors. We will make a decision for next year at the level of the ruling coalition.”
From the opposition, USR interim president, Cătălin Drulă, claims that, instead of lowering budget expenditure, PSD and PNL want to increase taxes and introduce progressive taxation, which USR sees as an additional burden on companies. Analysts, in turn, claim that the state needs to improve its revenue collection system, while increasing and adding new taxes should be a last resort. University lecturer Ionuţ Dumitru, a former president of the Fiscal Council, told Radio Romania.
“Right now, we dont need any increases in taxes, given the current economic slowdown. Increasing taxes right now would be a procyclical measure. We believe that the first and fair step would be to deal with tax evasion and get rid of tax optimization. Increasing taxes is the last thing a government should do. It makes no sense to discuss tax hikes when the government isnt even able to collect the taxes it is due”.
In this context, the National Fiscal Authority has intensified its inspections in economic areas with a high fiscal risk in order to curb tax evasion. Despite all measures taken by successive governments, revenue collection accounts for merely 27% of GDP, against a European average of 40%. This rate has not exceeded 31% in the last 32 years. (VP)
