“We are talking about a negative impact of 2.5 billion lei (EUR563 million) for a six-month period, or RON5 billion per year. Even for the state budget it’s a lot of money, which cannot be easily obtained,” Ionut Dumitru told a financial seminar organized by Ziarul Financiar.
Dumitru said the revenues from tax collection fell by more than RON1 billion short of the government’s target in the first quarter.
“If collection doesn’t significantly improve, then the budget revision can only be negative.”
One possible solution to improve tax collection would be to expand the taxpayers’ pool in the social security and pension sectors. There are approximately six million retirees in Romania and only a little over four million registered active employees, Dumitru said.
“Apart from the registered employees, there are some 1.5 million people in the underground economy who don’t pay any type of taxes,” he added.
The Romanian authorities are considering cutting social security contributions by up to five percentage points in a move to decrease the burden on labor. The government also contemplates replacing the 16% flat tax rate with a progressive one.
Prime Minister Victor Ponta said recently that the first-quarter budget figures were satisfactory and may give the government enough room to cut the social security tax.
Romania’s consolidated budget posted a deficit of RON900 million, or 0.14% of the gross domestic product in the January-April period. The gap was narrower from a deficit of 0.46% of GDP at the end of February and of 0.67% of GDP in the first quarter a year ago.