Plans to levy taxes on high pensions

Special pensions in excess of 7,000 lei may be subject to taxation according to draft legislation tabled by the Social Democrat finance minister Eugen Teodorivici.

Mihai Pelin, 18.09.2019, 13:50

The Senate’s budget and finance
committee has given green light to a bill to levy a 30% tax on special pensions
amounting to between 7,000 lei, the equivalent in lei of 1,480 euros, and 10,000
lei, that is 2,115 euros. Pensions higher than 10,000 lei are to be subject to
a 50% tax rate. This measure initially formed part of a package discussed during
a budget adjustment made at the beginning of August. The initiator of the bill,
the finance minister Eugen Teodorovici:

Pensions below 2,000 lei are not
subject to taxation, as stated in the government programme. A 10% tax rate is
levied on pensions higher than 2,000 lei and we will propose that a 30% tax
rate be levied on pensions between 7,000 and 10,000 lei, on the amount in
excess of 2,000, to avoid double taxation or overlapping.

The finance minister has explained
that where pensions are made up of different incomes, an individual declaration
is necessary to state the exact nature of each of these incomes. He has also
proposed an amendment to his own bill stating that the component of a pension
based on the principle of contributivity should not be subject to taxation. The
budget and finance committee also adopted a bill under which the pensions of
former presidents of the country should be subject to the same tax rate system.

The Liberal senator Florin Citu
proposed another amendment, rejected by the committee, that all special
pensions in excess of 5,000 lei should be subject to a 90% tax rate. We must
show tax payers acting in good faith and who pay their taxes and receive an
average pension of 1,100 lei that we will no longer tolerate these special laws
that have sprung up like mushrooms, he said. In his view, Teodorovici’s bill is
a populist move ahead of the election campaign for the presidential elections
in November.

Eugen Teodorovici first spoke
publicly about the idea to levy taxes on special pensions in July, alongside
another measure aimed at boosting budget revenues: restricting the number of
free train journeys for students. As expected, the proposal was met with harsh
criticism from those who benefit from special pensions, in particular
magistrates, who said it infringes on the independence of the judiciary.

The average pension in Romania at
the end of July amounted to the equivalent in lei of around 251 euros. This
makes Romanian pensioners among the poorest in the European Union, not to
mention that the constant rise in prices seen in recent years has eroded their
purchasing power even more. The pension point went up by 15% on the 1st
of September, a measures that benefits 5 million pensioners who receive public
pensions.