Romania’s Government plans to reduce the social security contributions (CAS) paid by Romanian employees, and those paid by local companies on behalf of their employees as well. The measure should be implemented starting January 1, 2017, according to the new Fiscal Code draft presented by the Government on Wednesday, February 18.

The social security tax paid by employees will be cut from 10.5% of the gross salary to 7.5%. The social contribution paid by companies for their employees will also go down from 15.8% to 13.5%.

With this measure, the Government aims to stimulate new job creation and the increase in taxed labour. According to Government estimates, Romania currently has some 1.1 million illegal workers.

The official number of people employed in full-time jobs in Romania was about 5.2 million, in September 2014, according to labour minister Rovana Plumb.

The social security tax cuts would reduce budgetary receipts from the existing employees, but the increase in the total number of jobs in Romania should compensate this.

The Government also plans to make social security taxes mandatory for all types of individual revenues in Romania, including intellectual property rights, which are currently exempted from this tax in certain conditions. This should further increase the tax base.

The estimated impact of this measure on the state budget in 2017 is a net decline in revenues of some EUR 560 million.

Last year, the Government cut the social security contributions paid by companies on behalf of their employees by 5 percentage points (from 20.8% to 15.8%). The measure was implemented starting October 2014.

Andrei Chirileasa, andrei@romania-insider.com