The Romanian government endorsed on September 4 the emergency ordinance that includes a series of measures aimed at curbing the fiscal deficit this year by collecting as many unpaid taxes as possible while also cutting unnecessary expenses. 

It’s not an austerity package, prime minister Marcel Ciolacu said ahead of the government meeting. However, it is heralding a much tougher fiscal consolidation package broadly expected for next year.

The government estimates that it will collect RON 7.9 billion, which accounts for only 15% of the unpaid taxes as of this moment, and will save RON 1 billion from the reduction of budget expenditures, Economedia.ro reported. 

Overall, the impact of the package is estimated at RON 9 billion or EUR 1.8 billion – just over 0.5% of the year’s projected GDP. 

This will not prevent the significant slippage of the budget deficit, projected by the European Commission at over 6.9% of GDP (ESA), up from 6.3% last year and far from the 5% of GDP target set by the Executive. However, it will demonstrate the government’s good faith ahead of the negotiations with the European Commission for a fiscal consolidation calendar, which Romania wishes to spread over the coming seven years.

Romania’s government published in advance the draft emergency ordinance for consultations, envisaging partial fiscal amnesty for individuals and companies with unpaid taxes as of August 31, as well as 3% bonuses for those paying their taxes on time this year.

Under the provisions of the draft emergency ordinance, all taxpayers (natural or legal persons) who pay the principal as of August 31 will be written off the interest and penalties. The measures regard all dues to the general government budget.

Supplementary, the natural persons, including those registered for business purposes (freelancers, liberal professions) owing under RON 5,000, are written off 50% of the principal while those owing more than RON5,000 only  25%. This measure regards only the dues owed to the central government budget.

The 3% bonus for good taxpayers is related to payments to the central government budget.

The move is aimed at recovering part of the RON 175 billion (EUR 35 billion) principal, interest, and penalties owed by individuals and companies to the general government budget, as well as encouraging good taxpayers.

The government estimates that the taxpayers still active, not under insolvency or bankruptcy procedures, owe to budget some RON 71.8 billion (EUR 14 billion), out of which RON 60.5 billion principal and RON 11.3 billion in interest and penalties – therefore could, in principle, be recovered.

iulian@romania-insider.com

(Photo source: Gov.ro)