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Ionut Dumitru: PNRR is a very useful instrument to place economy on the right path
The National Reform and Resilience Plan (PNNR) is a very useful instrument to place economy on the right path and from the point of view of taxation, said Ionut Dumitru, senior economist at Raiffeisen Bank, at a special debate.
According to him, Romania has a low tax collection in comparison to other states.
“Incomes from taxes are 26.8% of GDP, around 27%, while the European average is 40.9%. Our neighbors are before us, even Bulgaria is 3% above us. The major problem we have is VAT. If we consider VAT, Romania collects around 6% of GDP. We have a huge deficit, a VAT gap if 30% which could bring another 3% to GDP if it did not exist. If we look at out neighbors, Bulgaria, for instance, they are at a distance of light years in terms of VAT collection, and so is Hungary. Differences are very big in terms of collection efficiency. The VAT gap is the biggest in Romania, around 30%. Bulgaria, Poland, Hungary, have succeeded in going toward the European average. If we see what happened in the countries I mentioned, they have improved VAT collection gap a lot, they reduced it. We reduced VAT a lot but could not reduce VAT gap significantly,” Dumitru showed at the conference “Romanian economy strategy in the decade that will change the world: Resilience Plan”, organized by CursDeGuvernare.ro.
He said Romania collects very little in the field of social contributions, when it has taxes from social contributions or a fiscal burden from social contributions to the average salary over the European average.
Also, for income tax collection is very low, the lowest in Europe – 2.9% of GDP.
“We have a taxation share of 10%. Bulgaria, at the same share as us, collects 3.3%. Hungary, with a taxation share of 15%, collects 5.8% of GDP,” Dumitru mentioned.
He added that we have a large component of black economy.
“Over 20% of employees in Romania work in the black economy. We have a rather low labor force participation in economic activity. We also have a rather low share of employees. Many of them are free lancers, but not necessarily entrepreneurs, with hidden fiscal motivations. Things are the same when taxing profit. We are a country with huge farming potential. We are in top 5 in EU for tillable land, we have a rather large population living in the rural area and working in agriculture, but added value is 4% of GPD,”he added.