Romanian Finance Minister Viorel Stefan announced new tax cuts as of next year, although the recent planned cuts have raised concerns with the European Commission (EC) and the International Monetary Fund (IMF).
“We will certainly introduce from January 2018 the fiscal relaxation measures mentioned in the governing programme,” Stefan said in an interview for the Reuters Central & Eastern Europe Investment Summit. “Taxation levels will fall.”
He also said that the budget costs would be mitigated by a higher tax pool and most of the wage hikes would return to the budget in the form of taxes.
“To not affect (state) employees’ net wages, we must cut social security contributions, and we said down to 35 percent would be reasonable, and … cut the income tax,” he said, adding: “We want employees to have slightly more in net wages. (All these moves) make the impact on net salaries almost neutral.”
Moreover, he announced that the economic growth forecast for this year will exceed 5.2 percent and Romania would also meet its budget deficit target of 3.0 percent of gross domestic product for 2017.
EC estimates Romania will run the EU’s largest deficit ratios this year and next, at 3.5 percent and 3.7 percent of GDP respectively.
According to FinMin Stefan, EU and IMF did not take into account the impact of fiscal stimulus, which will boost the taxation pool and generate higher revenue, including from about 100,000 new jobs created since the start of the year.
He also said Bucharest plans to run large structural deficits until 2019 to help the EU’s second-poorest state catch up to Western peers.
Stefan pointed out the budget could run a surplus at the end of the first half, which would mean its 3 percent deficit target for the full year would certainly be met.