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.
“Unfortunately, we see no room for lower social security taxes considering the evolution of the state revenues,” Bucsa said Wednesday.
First-quarter revenues to the state budget were more than 1 billion lei (EUR223 million) behind target, according to government sources.
The UniCredit economist said a progressive tax rate is unlikely to yield better results compared with the 16% flat tax rate.
“It wouldn’t be feasible to apply a progressive tax rate with 16% as the highest rate, because at that level, revenue collections will be low. Conversely, it wouldn’t be a good idea to increase the tax rate either,” Bucsa said.
UniCredit estimates Romania’s economy will expand at an annualized pace of 2.7% in 2014, after growing 3.5% a year earlier.