Economic forecasts and fiscal measures

Supported by the Government of Romania, the new fiscal measures remain highly unpopular among trade unions.

Roxana Vasile, 10.11.2017, 13:49

Romania’s economic growth, as estimated by the National Forecast Commission as well as by international institutions like the European Commission, the International Monetary Fund, the European Bank for Reconstruction and Development and the World Bank, reassures the government made up by the Social Democratic Party and the Alliance of Liberals and Democrats in Romania. According to Brussels, for instance, in 2017 the Romanian economy is expected to grow by 5.7%, which is 1.4% more than forecast in spring. The growth rate estimated for 2018 is 4.4%, also more than initially forecast.

“The most important thing is for this growth to be felt by all Romanians, and we are on the right track,” was the reaction PM Mihai Tudose posted on Facebook. But the news is not all good for his team. The European Commission expects Romania’s budget deficit to reach this year the 3% ceiling accepted by the European Union, to widen to 3.9% next year and to reach 4.1% the following year, because of a planned public sector salary increase stipulated by a bill pending endorsement. This increase will go hand in hand with the recent changes in the Fiscal Code operated through an emergency decree, which shifts responsibility for the payment of social security contributions from employers to employees.

PM Tudose says that the measures will help increase people’s incomes, on the one hand, and the investments in road infrastructure, public healthcare and education on the other hand. At the same time, the foreign companies operating in Romania will no longer be allowed to move profits out of the country, but will have to pay all their taxes in Romania instead.

The Labour Minister Olguta Vasilescu says that with the new Fiscal Code in force as of January 1, the Government expects better collection of social security contributions to the state budget: “What did the employers do so far? They only paid the social security contributions owed by their employees, but not the quotas owed by their company as well. From now on, they will no longer be able to do this, this becomes a criminal offence, but the Fiscal Code is not the one to provide for penalties for criminal offences, other laws will take care of this aspect. These penalties will be paid by companies, not by employees, because it is companies that are bound by the Fiscal Code to transfer this money.”

On the other hand, trade unions remain quite vocal in criticising the new Fiscal Code. Dumitru Costin, the leader of the National Union Bloc, has announced he will request the Ombudsman to take the matter to the Constitutional Court: “Throughout this period of contacts with Government representatives, we tried to raise their awareness on the fact that Romania has ratified two major treaties, the European Code of Social Security and the revised European Social Charter. These documents include explicit provisions regarding the extent to which a country’s social security system may be financed by employees. There is a cap on this proportion, and this decree goes way over the provisions of the respective treaties.”

According to Finance Ministry statistics, in September over 157,000 employers had failed to pay social security contributions for their employees.

(Translated by Ana-Maria Popescu)