High impact tax measures taken by Grindeanu government. Trap of repealing maximum threshold for CAS and CASS

de Razvan Diaconu | 8.1.2017 .

fiscalitateThe emergency ordinance by which Grindeanu government will increase some wages of the employees from the public service (salaries in administration, culture) will have a budget impact of – 5.13 billion lei in 2017, according to the draft emergency ordinance published by the Ministry of Finance.

On the other hand, according to some other changes of the Tax Code expected for Friday, the employees will owe contributions to the pension and healthcare system for the entire income, as the current threshold equivalent to 5 gross national average salaries has been repealed. According to the Government’s calculations, the measure will ensure additional budget revenues of 1.9 billion lei.

The entire additional revenue will be spent after 1 July, on the increase of the pension point.

To note: the draft budget prepared by Ciolos government is based on a budget deficit of 2.99% of GDP, without integrating the impact of the social measures promised by PSD during the election campaign, which started to materialize on Friday.

List of measures decided by the Government on 6 January

The Government meeting agenda from Friday included an emergency ordinance for increasing several types of incomes.

The measures planned by the Government include:

  • introducing free railway transportation for students
  • increasing the pension point to 1,000 lei
  • increasing student scholarships by rising the allocation per student from 83 lei to 201 lei
  • increasing the minimum pension from 400 lei to 520 lei
  • 20% wage increase for the local administration
  • 50% wage increase for actors and other artist categories

According to the document, the budget impact of all the measures from the ordinance is of 5,13 billion lei for 2017. The document does not include the budget impact calculated for the next years.

Minimum wage increases to 1,450 lei, threshold for microenterprises increases to 500,000 euros

The increase in the minimum wage to 1,450 lei, the increase of 20% of the wages from the local administration and the 50% wage increase for actors and other groups of artists have been announced the day before the Government meeting by the Chairman of PSD, Liviu Dragnea.

Grindeanu’s cabinet also adopts the tax cut to 1% of the turnover for the enterprises below the threshold of 500,000 euros.

I hope for both the President and the opposition to understand the signal given by the Romanians’ vote. Romanians voted to have a better life,” justifies Liviu Dragnea the social measures from the debut of Grindeanu government.

On the other hand, the employees, PFAs, and pensioners who also obtain dividend, interest, royalty, and rental income will be exempted from CASS for these incomes.

Eliminating maximum threshold for CASS and CAS – long-term effects

The issue of eliminating the maximum threshold of five national average gross salaries for pension and healthcare contributions is likely to cause very big problems for the public pension system in time.

For now, authorities estimate that will collect an additional revenue of 2 billion lei by repealing this threshold – a wrong calculation from several points of view:

  • first, in an extraordinary session, lawmakers voted on Thursday the CASS exemption for pensions – annual budget impact: – 745 million lei
  • secondly, the Government also exempted on Friday the employees and PFAs from CASS for the income from dividends, interest, royalties, rentals (unspecified impact of this decision)

It means, without any doubt, that the 2 billion that Sorin Grindeanu counted in the opening of the government meeting on Friday are at the best one billion.

In the long term, the issue is much more complicated: The pension budget has a deficit of EUR3.2 billion. Since the “liberalized” CAS contributions, those who pay now higher contributions should receive in the future pensions commensurate with their contributions.

By complementing the picture with the statistics from INS on the birth rate, analysing the clear trend of demographic aging, the long-term unsustainability of the measures summarized above becomes obvious.

Publicat la data de 8.1.2017 .

Lasa un comentariu


SIMILAR ARTICLES

Marin Pana

Adapting Romanian production to increasing incomes – rapid development and trade balancing are at stake

Romania is increasingly specializing in the extremes of the demand range High-quality products for the foreign markets or parts incorporated at low prices in quality products marketed as final products in other countries Along with products at a modest level of quality and moderate price for the domestic solvent market In other words, we exploit small gaps identified among the already ...
Read more »

Cristian Grosu

Cristian Grosu / Why Romania is doomed to improvise: Unproductive Romania and delirium of decision makers

  It is not that, after a fashion, we have something to cook every evening – us, employees, entrepreneurs, decision makers, plits (politicians for life, irrespective of their skills) or just spectators: but that is (INCREASINGLY!) difficult for Romania to become a productive country in the strict sense, because the context of our economic game requires a visionary conceptualization ...
Read more »

Mariana Bechir

DESI 2017, Romania: Best Internet speed, but ranking last in EU in terms of using it

The European Commission has published the Digital Economy and Society Index (DESI), 2017 edition, which shows that the only thing that Romania prides itself, namely the Internet speed, is not enough for our country to move from the traditional last position in the EU ranking Romania ranks 28th in DESI 2017 The report says: "Romanians benefit from coverage of fast broadband connections in urban ...
Read more »

Mariana Bechir

State, as employer in capitalist Romania: a different analyisis of private economy

Who keeps alive the economy, administrative systems, budgets of all kinds - from the investment to pension budget - and ultimately the whole society The answer to this question - that should be simple: private economy - looks more like a patchwork than it should There are entire areas of the economy where the state is the employer without which nothing moves And "the private ...
Read more »

Marin Pana

Warning (detailed) for lucid ones: 4.8% – highest growth in Europe – NOT based on something tangible: Industry contributed 0.4%, construction 0.1% and agriculture nothing

The National Institute of Statistics (INS) confirmed the last year's economic growth at 48%, the first preliminary version published after the initial forecast announced as a signal (We remind that the second preliminary version is to be announced after about a month and the semi-final version after one year, while the data will remain "set in stone" only after two years, in their final ...
Read more »


NEWS

IMF mission concluded consultations in Bucharest – Government’s options

The IMF mission concluded Thursday a 7-day visit in Romania in the annual process of consultation under Article 4, after a small delegation came to ... Read more

Romanian leu depreciated to reach 4.5654 lei/euro, record level of last four and a half years

The reference exchange rate announced Friday by BNR was 4.5654 lei/euro, 0.3% more than the level reached in the previous session and a maximum level ... Read more

Liviu Voinea (BNR): 7,000 notifications on debt to equity swap, by February; loans amounting to 2 billion lei

The number of notifications registered under the Law on debt to equity swap reached to 7,000 at the end of February, representing total loans amounting ... Read more

Siegfried Muresan: Romania should make joining Schengen a condition to accept two-speed Europe

Member of the European Parliament Siegfried Muresan (photo) said in Strasbourg that the idea of a multispeed Europe is not wrong altogether, and Romania should ... Read more

Valentin Lazea: Absorption of EU funds could lead to a 4.5% increase of potential GDP

The International Monetary Fund (IMF) told the officials of the National Bank of Romania (BNR) that a 95% absorption of the European funds would lead ... Read more

Investigation on record high prices on energy market: 440 million lei in losses generated by seven to eight traders. Guilty ones lose their licenses

Seven or eight energy traders generated total losses of 440 million lei to the suppliers of last resort and the network operators, losses that will ... Read more

ANAF announces a campaign to control compliance of tax declarations

ANAF announced Thursday that will launch inspections starting in April that will include institutions from the financial and banking sector, with the aim of checking ... Read more

Romanians pay among the highest utility costs in Europe, by reference to their income

Romania ranks second in the ranking of families from the European Union who spend more than 40% of their income on home utilities (electricity, gas, ... Read more

Hourly labour cost increased by over 12% in Q4 2016 compared to 2015. Higher earnings in healthcare and education

The hourly labour cost in adjusted terms (by the number of working days) registered an increase of 12.33% in the fourth quarter of 2016 compared ... Read more

Emergency measures to control deficit: Minister of Finance blocked recruitment for budget institutions and halted promotions

Minister Viorel Stefan (foto) urged to keep the deficit under control. In the midst of the discussion about the increased salaries, government officials turn off the ... Read more

Ministry of Finance, investigations on misleading and comparative advertising

The Ministry of Finance announced Wednesday that it has started an information and verification campaign on a sample of 447 firms that sell food, beverages, ... Read more

Budget implementation of January 2017 - 5.7% lower revenue and 3.5% higher expenditure compared to January 2016

The Ministry of Public Finance published Monday the report on the implementation of the consolidated general budget for January 2017. According to the official announcement, ... Read more

Romania, Hungary and Slovakia are competing for an EUR 200 million Mitsubishi investment 

After Renault, Ford and Daimler, another big car manufacturer intends to establish an engine factory in Romania: the company is Mitsubishi, announces ProTV. According to ... Read more

2017 started with a decreasing confidence in economy and leu, according to CFA Romania Index

The index of macroeconomic confidence has declined for the second consecutive month, down to 54.9 points in January 201, of 100 points in total. “The ... Read more

One of 102 taxes eliminated is back: Daniel Constantin announces new version of car pollution tax

Daniel Constantin probably has not read the program of the PSD government The Minister of Environment Daniel Constantin (foto) announced on Tuesday that, probably next ... Read more

Competition Council investigates why fuel prices in Romania exceeds the EU average

The Competition Council has launched a sectoral investigation on the fuel market, to analyse why the prices in Romania are above the EU average, said ... Read more

2017 European Semester, analysis on Romania: growth above potential, worrying deficit estimates

Despite Romania’s progress in implementing the recommendations of the European Commission (EC), “the structural challenges may dampen the medium-term outlook,” mentions the report on Romania. ... Read more

2017 trends : Bucharest Stock Exchange indices hit new 5-year highs. BET exceeded psychological threshold of 8,000 points

The most important indices of the Bucharest Stock Exchange (BSE) registered new 5-year high Wednesday at noon and continued the favourable trend of the last ... Read more

World Bank, interested to support founding of Sovereign Investment Fund

Alexandru Petrescu, Minister of Economy The World Bank is interested in the announcement that Romania plans to establish a Sovereign Fund for Development and Investment ... Read more

Memorandum: Sovereign Fund to be financed from selling shares of state companies and bonds

To obtain financing, the Sovereign Fund for Development and Investment (FSDI) planned by the Government will sell shares in the state companies received in its ... Read more