The main challenge in the public finance sector remains improving the expenditure management.
“Inefficient spending continues to be a major challenge in the sector of public finances. A correct way to reform the system would be to keep focusing on how to improve public expenditure,” said Lucian Croitoru, adviser to central bank governor Mugur Isarescu.
“Raising taxes while spending public money ineffectively is not a correct solution,” Croitoru told a banking seminar.
He said a higher taxation is usually counterproductive when one seeks to stimulate economic growth and reduce unemployment.
“You only increase taxes when you want to slow down economic growth,” the central bank official said.
Romania’s government recently announced a series of new fiscal measures, in a bid to boost revenues and balance up planned increases of public salaries and pensions.
The new measures include a new calculation system for excise taxes, which will be indexed to inflation starting with 2014, as well as additional property and fuel taxes.
Budget Minister Liviu Voinea said earlier this month that the new tax on fuels is meant to avoid a potential deflation.
“At the moment, there are no data that would indicate a risk of deflation. The inflationary anticipations are rather stable,” Croitoru said.
Even if that were the case, deflation can be fought by widening the budget deficit, and not by increasing taxation, the bank official added.