Progressive taxation as of January 1, 2018?

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Labour Minister Lia Olguţa Vasilescu has announced on Thursday to Realitatea TV that as of January 1 the government will turn to progressive taxation, with two levels of 0 and 10%. On the other hand, the tax burden on labour will fall from 43% to 35%.

Minister Lia Olguţa Vasilescu has announced that next year the government will abandon the flat tax of 16%. Instead, two levels depending on the income of employees will be introduced.

“As of January 1 the salary contributions will reach 35% and income tax becomes 0% for those with wages below RON 2,000 and 10% for wages over RON 2,000,” the labour minister said.

The announcement is all the more surprising as it comes from the labour minister. Finance Minister Viorel Ştefan was reluctant to speak so far on this subject.

Economists are quite reserved and argue that wage increases will be felt only by the public sector, realitatea.net informs.

Economists believe revenues to the state budget will fall by billions of RON. The social security budget will lose the most, and given the huge deficit already registered, it will be increasingly difficult to speak of a stable pension system.

In Romania, the income tax is 16%, the current flat tax was introduced in 2005, when prime minister was Călin Popescu Tăriceanu. Until then, the levels applied had been progressive on five grids, between 18 and 40%. Before 2000, progressive taxation reached up to 48% of revenues.

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