Romania’s National Liberal Party (PNL) submitted yesterday a draft law that reduces the social security contributions to 32.25%, cuts the individual income tax and the corporate profit tax rate to 10%, and fully transfers the payment of unemployment insurance to the employee.

The bill would “encourage entrepreneurs to invest in Romania, to increase wages, but not lose jobs,” said PNL president Raluca Turcan, reports local Economica.net.

She explained that the draft law would reduce the share of social security contributions payable by the employer and employee from 39.25% to 32.25% for the gross wage. The income tax rate would be cut from 16% to 10%, and so would be the profit tax rate. In addition, the payment of unemployment insurance would be entirely transferred to the employee.

This initiative could bring some RON 8 billion (EUR 1.76 billion) to the state budget, Turcan added. The measures represent a “correct solution”, given that the business is currently burdened by the cost on manpower and is not stimulated to give higher wages without decreasing the number of jobs.

The Social Democratic Party (PSD), which currently has the majority in the Parliament and most of the seats in the Government, also included tax cuts in its governing program. PSD promised to reduce social contributions from 39.25% to 35% and the individual income tax from 16% to 10% starting January 1, 2018. Moreover, PSD wants to cut the income tax to 0 for salaries under RON 2,000.

However, such fiscal relaxation measures require a significant readjustment of budget policies, as the Government also promised to increase the salaries of public employees and the pensions.

editor@romania-insider.com