Proposals to amend the Fiscal Code

The government in Bucharest is considering new fiscal measures.

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Daniela Budu, 27.10.2017, 13:07

The Romanian government has analysed, in a first reading, the bill on the modification of the Fiscal Code, which provides for a number of measures which, they believe, will benefit the business environment. Among these measures is the proposal to reduce the income tax to 10% for certain categories of incomes. The government has also discussed several ordinances, which stipulate, among other things, an increase in the minimum gross salary and the reduction of employees contribution to the privately managed pension fund known as Pillar 2.

The finance minister Ionuţ Mişa has presented the fiscal measures that the government intends to take next year.

“We intend to cut income tax from 16% to 10% and to also reduce social security contributions, whose payment will become the responsibility of employees. Social security contributions will drop by 2%. The contributions to be paid by employers will also be reduced to 2.25% and will cover the payment of unemployment risk, hazards, medical leave and salary debts.”

The labour minister Lia Olguţa Vasilescu has announced the governments intention to increase, as of January 1, the minimum gross salary to more than 400 euros. At present, over one million Romanian employees, that is one fifth of the total number of employees, earn the minimum salary. According to the labour minister, the minimum pension and the child-rearing allowance will also be increased.

“The minimum child-rearing allowance will increase as of January 2018 to 1,250 lei as compared to 1,233 lei at present. The minimum pension will increase to 640 lei and the pension point will go up to 1,100 lei as of July 1, 2018.”

Minister Vasilescu has also added that the amount to be paid to Pillar 2 will drop from 5.1% to 3.7%. The pension funds Pillar 2 has caused a lot of debates this year, despite the Social Democrats constantly denying rumours that they plan to nationalise this fund. Analysts say the Bucharest Stock Exchange will be most affected by the reduction of Pillar 2 contributions because they will no longer have money for purchasing shares.

In another development, a survey conducted last month among the members of the Foreign Investors Council has shown that the investors sentiment regarding Romanias business environment is considerably deteriorating, especially as regards legislative predictability and the stability of the fiscal framework. 90% of the respondents said the permanently changing legislation affected the planning of their business. 65% claim the tax burden has increased and 3 quarters believe the business environment has recently deteriorated and that the latest developments have led to a drop in companies trust. The Foreign Investors Council says the authorities should develop a more coherent policy meant to attract direct foreign investments and make the area of fiscal policy more predictable.