Romania's new coalition government will introduce a series of tax increases and restrictions on public sector wages and pensions through an emergency decree to be adopted tomorrow, Reuters reported, quoted by News.bg.
The aim of these measures is to reduce the EU's largest budget deficit as a percentage of Romania's gross domestic product (GDP). The country, whose economy is the second largest in Central Europe, faces a budget deficit that is expected to reach 8.6% of GDP in 2024, due to increased spending ahead of presidential and parliamentary elections in November and December.
However, Romania has an obligation to reduce its deficit to 3% of GDP within seven years. The government's emergency decree reflects the need for these fiscal measures to come into effect before January.
Romania submitted a deficit reduction plan to the European Commission in late October, but did not specify what tax and spending measures it would take.
A draft emergency decree published today by the finance ministry shows that the government will increase the tax on company dividends from 8% to 10%, starting in January 2025. It will also lower the tax threshold for the smallest companies with fewer than three employees and annual revenues below 500,000 euros, in stages in 2025 and 2026.
It is also planned to eliminate tax breaks and fiscal incentives for the IT sector, construction, agriculture and the food industry. In addition, a tax on the value of all buildings owned by companies will be reintroduced, not only industrial buildings but also other infrastructure sites such as oil wells and electricity pylons.
The decree will also introduce limits on public sector salaries and pensions, as well as a reduction in state subsidies for political parties by a quarter compared to 2024.
In addition, the government will create an efficiency department, which will be responsible for reducing public spending by at least 1% of economic output by 2025.
Romania's long-term plan is to reduce its deficit gradually over seven years - from 7% in 2025. to 2.5% in 2031.
Three consecutive votes to elect a new president and parliament in Romania, which coincided with growing speculation about Russian interference, led to the annulment of the elections by the Constitutional Court in November. Rating agencies, such as Fitch, then changed Romania's outlook from "stable" to "negative" due to the country's political and economic instability.