The Constitutional Court of Romania rejected on October 18 the objections raised by a group of lawmakers to the fiscal corrective package promoted by the government with the end of pursuing budgetary consolidation.

All the measures in the package are aimed at reaching one single target (fiscal consolidation), the Constitutional Court explains – rejecting the opposition’s objection related to the legislative procedure used by the government to pass the bill quickly by the Parliament.

Most of the measures of the fiscal corrective package will be enforced as of January 2024, while minor measures aimed in general at cutting public spending will be enforced as of November 1.

The International Monetary Fund (IMF) estimates that the package will have a favourable impact of 1% of GDP on the public deficit. Further corrective measures are needed in order to achieve the 3%-of-GDP fiscal consolidation target.

The major criticism expressed by the business associations regards the 1% turnover tax, levied in case the profit tax is lower than this value. It is a measure with no economic basis (its effects vary dramatically across economic sectors), taken by the government in order to offset its weak administrative capacity of collecting the existing taxes.

Under another significant measure included in the package, the preferential regime extended in the past to certain industries (waiving income tax and/or social security contributions, and preferential VAT rates) will be eliminated. 

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)