Bucharest urgently seeks money to patch up its huge hole in the budget as it risks losing European funds due to potential non-compliance with deficit targets, according to Euractiv.
The budget deficit reached 2.32% of GDP in the first five months, totalling 36,91 billion lei (€7.45 billion), compared to 1.72% of GDP – 27.35 billion lei (€5.52 billion) in the first four months, according to the data published by the Ministry of Finance.
Prime Minister Marcel Ciolacu said that Romania aims to keep its government deficit at 4.4% of the GDP in 2023. Otherwise, European funds and implementing reforms under the National Recovery and Resilience Plan (PNRR) could be negatively impacted.
Ciolacu does not think it is “appropriate to levy new taxes” during an ongoing economic crisis.
As a potential solution, the governing coalition has discussed the possibility of removing exemptions for health contributions. Currently, there are exemptions in agriculture and construction sectors. Also, there is no income tax in the IT sector.
However, Ciolacu ruled out the removal of tax facilities in IT. On the other hand, he said that the World Bank, the International Monetary Fund and the European Commission have recommended Romania for years to repeal tax incentives.
The government also considers increasing excise duties on sugar, alcohol, and tobacco.
The elimination of these facilities alone is insufficient.
Ionut Stroe, the liberals’ spokesperson, suggests implementing other measures such as enhancing tax collection efforts and imposing higher royalties on luxury or vice products.
Former Prime Minister Theodor Stolojan advocates for the elimination of all tax benefits.