International Information Centre for Balkan Studies

Romanian Parliament to Green Light Tax Cuts

Parliament's second chamber on Thursday was due to nod through a new fiscal code, slashing VAT, which critics say could blow a hole in government revenues.

Romania’s second chamber, the Chamber of Deputies, on Thursday is to hold the final vote on the reviewed fiscal code, which includes a package of controversial tax cuts.

The vote is a formality, as the main political parties have now agreed to support cutting VAT from 24 to 20 per cent starting January 1, 2016, and to 19 per cent starting 2017.

The new Fiscal Code’s initial form was rejected by President Klaus Iohannis who sent the code back to parliament for review, citing concerns about the likely impact of the fiscal relaxation measures on the budget.

The centre-left government of Victor Ponta has continued to champion tax cuts, however, saying they are needed to boost growth.

The scope of the cuts has also raised concerns about a fall in government revenue from the European Commission and the International Monetary Fund, IMF.

President Iohannis also asked for the imposition of an extra excise on fuel and a fee on special constructions to be postponed.

The new code delays the excise tax on fuel to 2017 and does not contain the tax on special buildings.

The cuts are expected to lead to Romania running a budget deficit of 2 per cent of GDP next year, up from an estimated deficit of 1.8 per cent in 2015.

This would be larger than was initially agreed under an EU fiscal pact but still lower than the 3-per-cent Maastricht ceiling.

Source: Romanian media


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