Fiscal measures

The Government in Bucharest is determined to go through with the measure of cutting by 5% the employers contribution to the social security fund. Prime Minister Victor Ponta has confirmed it, in spite of criticism by various parties.

Florentin Căpitănescu, 19.06.2014, 14:13

Without being green-lighted by Romania’s international lenders — the IMF, the European Commission and the World Bank — the measure of reducing the employers’ contribution to the social security fund by 5% is to be implemented as of October 1st, after the last technical details are perfected. On Wednesday, the Government endorsed a draft law on the matter, which is very likely to be passed by Parliament and then promulgated by President Traian Basescu, who seems to favour the idea.

PM Victor Ponta: “The Senate has notified me that it is ready to discuss and pass the bill under a fast procedure, while the Chamber of Deputies, that is scheduled to convene in early July for an extraordinary sitting, will use this opportunity to endorse it. The last stage is the bill’s promulgation by the head of state. We had clear talks with the international financial institutions and this year we manage to observe all the commitments we have made. What’s important is to make this measure sustainable in the long run, due to fiscal budgetary measures and to steps taken to curb fiscal evasion. “

Pundits, however, say that turning this fiscal measure into law is aimed at increasing political legitimacy, given that international financial institutions, the centre-right Opposition and trade union confederations alike made no secret of the fact that they still have doubts about it. The Opposition, represented by the former Liberal Democratic PM Emil Boc, argues that the measure of reducing the social security contributions paid by employers is enforced in the wake of the December presidential election.

Emil Boc: “An extremely important measure for the Romanian economy is unfortunately turned into propaganda because it will be enforced right before the election campaign, without having the OK of the IMF”.

In turn, the Cartel Alfa National Trade Union Confederation sees the measure as likely to increase companies’ net profit, of multinational companies in particular. Moreover, Cartel Alfa says this measure cuts by around 20% the contribution to the pension system, and thus decreases the social security budget by around 6 billion lei, that is 1.35 billion euros per year. PM Ponta however says the measure will not impact the social security budget because debts recuperated from insolvent companies will compensate losses.