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EC: the fiscal reforms should reflect the aspects pertaining to efficiency and correctness, including the effects on the population

The design of the taxing systems and fiscal reforms should reflect the aspects which have efficiency and correctness, including the effects on the different categories of population, say the representatives of the European Commission interviewed by Agerpres to comment with regard to the recent proposals to amend the Fiscal Code.

‘The annual survey for 2017 which establishes the economic priorities for the EU and offers the EU governments directions for policy for the next year, requires the member states to offer a special attention on the effects of the fiscal reforms. The design of the taxing systems and the fiscal reforms should reflect the aspects which pertain to efficiency and correctness, including the effects on the different categories of population’ say the quoted sources.

The experts in Brussels remind the fact that, starting with June 2017 Romanian was included in a procedure of significant deviation and the Council recommended Romania to take measures to ensure that the nominal rate of governmental expenses should not surpass 3.3% in 2017. This corresponds to an annual structural adjustment of 0.5% of GDP.

‘This adjustment could place the country on the adequate adjustment road to the budgetary target on medium term. Moreover, the council recommended the adoption of measures for budgetary consolidation which should ensure an improvement, a sustainable one of the governmental balance in a way which should support the economic growth. Romania reported that they took measures as a response to the recommendation formulated by the council on 13 October. The commission will evaluate the report and later will recommend to the Council if the measures  were taken on time’the  EC representatives say.

In the summer of this year, the European Commission addressed Romania a warning with regards to the existence of a significant deviation in 2016 from the adjustment road with a view to reaching the budgetary objective on medium term and recommended the council to adopt a document to impose Romania to take the necessary measures in 2017 to correct this significant deviation.

According to the document sent by EC in 2018 taking into consideration the fiscal situation. Romania would make supplementary adjustments to reach the budgetary objective on medium term, to have a structural deficit of1% of GDP. According to the Pact of Growth and Stability, the adjustment will translate in the request of a nominal rate of growth of the governmental expenses which should not surpass 4.3% which would correspond to a structural adjustment of 0.5% of GDP.

According to the economic autumn estimates published at the end of last week by the community executive in Romania the public deficit would reach 3% of GDP in 2017, so that in 2018 it deepens to 3.9% of GDP and reach 4.1% in 2019.

EC estimates, on the other hand, that the Romanian economy would have an advance of 5.7% in 2017, significantly growing against the estimates covered in the spring estimates which showed an advance of the GDP of 4.3%.

The government approved last week the amendment of the fiscal code, the most important measures being the tax for SMEs , the income tax and the social contributions.

The document increased from 500,000 euro to one million euro the threshold of the necessary  income for a company to be considered a micro-entreprise, so that all these companies will pay a tax of 1% for income, instead of 16% on profit.

At the same time, the authorities decided to pass the social contributions from the employer to the employee and to diminish the income tax from 16% to 10%.

Starting with 1 January 2018, the level of paid  contributions for the gross salary will drop with 2 percentage points, from 39.25% to 37.25% but out of the total of 22.75% contributions due by the employer, 20 points will be transferred to the employee. Thus,out of the gross salary 35% will be contributions taken by the employer in the name of the employee, and the contributions left to the employer, 2.75% (after the transfer of 20 percentage points) drop to 2.25% and will cover the unemployment risks, work incidents, medical leave, salary debts.

At the same time, the government approved the document which includes the diminution of the contributions to the Pillar II for pensions from 5.1% to 3.75%.

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Tuesday, November 14, 2017