Fiscal measures to reduce the budget deficit
The government of Romania is planning a tax reform in order to rebalance the state budget
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Leyla Cheamil, 18.08.2023, 14:00
A state budget deficit significantly above the target has prompted the Romanian authorities to take steps to address the situation.
The finance minister Marcel Boloș announced on Thursday that this set of tax-related measures must be endorsed in September, first of all in order to ensure that EU funding is not suspended.
„Not implementing these measures or implementing them too late would lead to a budget deficit of around 7% of GDP,” Marcel Boloș explained, and warned that this is a turning point for Romania.
The set of changes announced by the finance minister includes measures targeting multinational corporations and a 10-fold increase in fines in order to curb tax evasion. Adding to these are increased royalties, even 1000 times, for mineral resources and hydrocarbons, and an extensive reorganization plan for the national tax administration agency in order to improve revenue collection.
Marcel Boloş: „It is unfair for companies that develop mineral resources and have billions in turnover and huge profits to pay minimal, even insulting royalties to the state budget. These will be rearranged, and some royalty categories will be even 1,000 times higher. It is only reasonable. These are royalties for the exploitation of mineral resources and hydrocarbons as well as for the land itself, and it is ridiculous and absurd for the state budget to receive RON 2.5 million for 300,000 hectares.ˮ
As for the measures targeting the public sector, Marcel Boloş mentioned decentralization and the regionalisation of public services, so as to eliminate what he called the „splurge” of public money.
„We need a lot less bureaucracy, a lot more thoughtfulness in spending public money,ˮ Marcel Boloș pointed out. According to him, these measures are expected to have a combined impact of 2% of GDP.
Meanwhile, the news from the Fiscal Council is not encouraging. The institution made an upward adjustment of its budget deficit forecast, and says the deficit will be over 6% of GDP unless correction measures are implemented. According to the Councils annual report, the budget deficit for the first half of the year, standing at 2.3% of GDP, is around 0.63% higher than in the corresponding period of last year. The reasons have to do with the slower dynamics of certain categories of revenues and an increase in spending above the levels in the budget law. The Council reiterated the importance of introducing immediate corrections and of substantially increasing tax revenues. (AMP)
