Tax on special pensions

Parliament decided that the so-called special pensions will be subject to taxation

Bogdan Matei, 18.06.2020, 14:00

A recurrent topic in public debates in Romania, the taxation of the so-called “special pensions, which are not based on prior contributions to social security funds, seems to have been finally settled. On Wednesday, the Chamber of Deputies approved, almost unanimously (307 votes in favour and only one against) the introduction of a tax on the balance between special pension benefits and the pension determined by regular contributions to the public pension fund during employment.

Pensions between roughly 400 and 1,500 euro (some 7,000 lei) will be subject to a 10% tax, as it has been the case so far; however, for amounts in excess of this threshold, the tax will be 85%.

The decision regarding the progressive taxation of special pensions was taken in an accelerated procedure, by all parliamentary parties. The former labour minister, the Social Democratic Deputy Lia Olguţa Vasilescu, promised that the document is in compliance with constitutional provisions:

Lia Olguţa Vasilescu: “We fully complied with the Law on public pensions, but if a magistrate or an MP or whoever receives pension benefits in excess of 7,000 de lei, up to that level the tax will be 10%. Nobody can tell the Constitutional Court that their rights have been infringed on.

The leader of the Liberal group in the Chamber of Deputies, Florin Roman, was just as straightforward:

Florin Roman: “Obviously, there must be lots of judges, lots of prosecutors, lots of police or army chiefs who are very upset about this. But what we are doing here, with this bill, does justice to the military, to police officers, where there were huge gaps between the pensions paid to those who had been in theatres of operations and those paid to high-ranking generals just sitting in an office.

According to data communicated by the Public Pensions Agency, the number of people receiving special pension at the end of last month was around 9,500. Nearly 4,100 of them are covered by the Law regulating the prosecutor and judge professions. One of them is the recipient of the largest pension in Romania, over 19,000 lei. Special pensions are also paid to around 150,000 former employees of the public order and national security systems.

Observers have noted the unusual consensus reached by parliamentary parties in this respect. Somehow, they say, this was bound to happen. On the one hand, because, given the COVID 19 pandemic and the enormous public spending it required, the scheduled 40% increase of regular pensions this autumn is increasingly unlikely. And secondly, because in a few short months Romania has local and parliamentary elections, and no party will refrain from trying to humour voters with measures that people agree with.

(translated by: Ana-Maria Popescu)