The progressive taxation is not only the idea of Social Democrats, but the IMF experts have also circulated it insistently, most of the EU member states use it and, currently, concrete strategies to implement such a system in Romania are being carried out by authorities, the head of tax and legal assistance department of the audit and consulting company EY, Alex Milcev, admitted. 

This will not come as a surprise when enforced, he said – before suddenly returning to the tax experts' preferred argument in favour of the flat tax that "is simple [...] has worked, was also appreciated by the business environment, attracted foreign and Romanian investments to the country, brought money to the budget, and fostered growth." 

These all may be true, but the flat income taxation also generated or at least hasn't addressed the wide income discrepancy in Romania, which is the widest among all EU member states, according to Eurostat.

While admitting the imminence of progressive taxation, Milcev said that he expects the income tax and dividend tax rates to rise from 10% and 8%, respectively, to 16% (the corporate tax rate) in 2025, not necessarily from January, Economedia.ro reported. This would equate to a restoration of the flat tax rate – only at a higher rate compared to the 10% benchmark used when it was enforced for the first time. 

Additionally, the standard VAT rate might increase by 1%-2% – also sometime in 2025, he said, adding that this is the most evident solution to bring money to the budget.

iulian@romania-insider.com

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