FinMin Dragu: The impact of social security cuts by 5 pc would be RON 7.7bn

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Cuts in social security contributions (CAS) by 5 percentage points would cost the budget some RON 7.7 billion in 2017 and there is no place for such a measure, Finance Minister Anca Dragu said on Tuesday.

“We’ve conducted an impact calculation, it would cost the budget RON 7.7 billion (approx. EUR 1.71 billion). It’s a too high amount for 2017, as the budgetary deficit is large. There is no room for such a decrease in revenues,” Dragu said.

According to the Finance Ministry, next year the budgetary deficit will be below 3%, to about 2.8% of GDP, while in 2016 will amount to 2.95% if the GDP. A government decision will be included in the final form of the law on cutting the social security contribution by 5 percentage points.

Fiscal Council head Ionut Dumitru says the CAS cuts would have been more suited for 2017 than the further cut of VAT by 1%, as the consumption has already increased by 10% in real terms, while wages have increased by 12%.

“We’ve noticed the Senate approved on Monday a CAS cut by 5 percentage points. It is a fair decision, but in comes in a bad moment. We should say it plainly, the CAS reduction, with a budgetary impact of some RON 7.7 billion, has no place within the budget,” Ionut Dumitru said.

The Senate approved on Monday the proposal of reducing the socials security contributions by 5 percentage points – 2 percentage points for the employer and 3 percentage points for the employed. The draft was adopted by 67 voted ‘for’, 23 votes ‘against’ and one abstention. The budget committee report was negative, but did not get the necessary support. The government has had a negative viewpoint on this draft law.

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