This means that the share of revenue in the GDP stood at merely 31.3% instead of 33.1% as initially estimated. The government failed to collect RON10 billion (EUR2.3 billion) for the budget.
The 2012 budget is missing RON10 billion, because the government was unable to collect money from the economy at the same rate as the economy was growing at last year.
The government built the 2011 budget around a GDP seen at RON547 billion, and a collection rate for the consolidated budget, which includes the state budget, the social security budgets, the self-financed institution budgets and the local budgets, of 33.1% of GDP, therefore RON181 billion in revenue.
Romania actually ended 2011 with RON578 billion in GDP, and the government should have collected RON191 billion until the end of last year, where it to keep the collection rate as set at 33.1%. It eventually collected only RON181 billion, as indicated by Finance Ministry data.
Why is this?
“First of all, the quality of the economic growth matters. The GDP grew because of the agriculture and this sector does not collect that many taxes. One must also consider that the initial GDP estimate also took into account a certain European fund absorption rate,” says Ionut Dumitru, chief economist of Raiffeisen Bank and chairman of the country’s Fiscal Council.
The result is due to both the government being taken by the surprise by the better than expected economic data and to the Finance Ministry being unable to boost collection of taxes to keep up with the growth rate of the economy.
Every government of the last ten years has come up with projects to boost revenue by strengthening discipline in collecting taxes, which did not go beyond mere talk, so that the share of revenue in the GDP has never exceeded 33%.
The government introduced reverse taxation on grain trade last year, something it hoped would help it eliminate tax evasion but did not. On the other hand, when it built the budget it set out to absorb EUR3 billion in European funds but this level eventually stood at EUR1 billion. (EUR1=RON4.3537)
(English version by Loredana Frățilă-Cristescu)