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Government plans new or higher taxes, cuts spending to limit worrying fiscal gap

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Romanian government is planning to introduce new taxes for sugary soft drinks and big pensions, raise taxes for cigarettes and cut spending by reducing bonuses and staff in the public administration, according to a draft emergency decree released by the Finance Ministry.

The plan was put together by the government due to the fact that it is running out of resources to cover soaring spending on wages and pensions.

In the first half of this year, the budget deficit increased to RON 19.96 billion or 1.94 percent of the gross domestic product (GDP), according to data from the Finance Ministry, which represents a 38.5 percent rise compared to the deficit of 1.4 percent of GDP recorded in May 2019.

Compared to H1 2018, when the fiscal gap totaled RON 14.97 billion, the public deficit rose by 33.4 percent.

The main fiscal measures proposed by the Ministry of Finance:

  • Progressive taxes on pensions over RON 2,000 – 10 percent tax for pensions between RON 2,000 – RON 7,000, 30 percent for pensions between RON 7,000 – RON 10,000, 50 percent for pensions over RON 10,000.

  • New tax on soft drinks with high sugar content.

  • Higher excises on cigarettes (+4.2 percent) from September.

  • Bonuses for state employees: some bonuses eliminated (e.g. the 15 percent-bonus for hazardous conditions); other bonuses capped.

  • Cutting the number of state secretaries in ministries and their staff.

The new plan is expected to be approved by the government this Monday through an emergency decree.

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