Projects in Romania have received funding of a total of EUR 676 million from the European Fund for Strategic Investments (FEIS), according to a report… Mai mult›
Stock exchange: Active investors have closed a quarter of their accounts over last two years. Mechanisms of our underdevelopment and stock markets from neighbour countries
The number of active accounts at the Bucharest Stock Exchange (BSE) fell by more than 27% from the fall of 2016 until June 30,… Mai mult›
Four impact scenarios of OUG 114, as they were presented by Florin Georgescu to Liviu Dragnea and C.P. Tariceanu
The tax on bank assets, called the “tax on greed” by OUG 114 authors who imposed it, may reduce the economic growth by 0.6-1.1 percentage… Mai mult›
Hourly labour costs grew by 13.09% in the fourth quarter of 2018 compared to the same period in 2017, according to data announced by INS.… Mai mult›
Bulgaria vs. Romania: Reform and results of tax authority in Sofia and counter-reform and its consequences in Bucharest
Bulgarian tax authorities, which have successfully implemented a modernization program with World Bank’s support, a program that Romania abandoned after six years of delays and… Mai mult›
Budget revenue, historical minimum – below two-thirds of EU average as a share of GDP. Declining trend and low values across the board
de Marin Pana , 10.12.2018
With only 25.8%, our country had a share above only Ireland (23.5%), but in the context that Ireland’s GDP is expanded by statements of some multinationals that have moved their headquarters there in the anticipation of Brexit).
Bulgaria (29.5%), Lithuania (29.8%) and Latvia (31.4%) are present at a far distance above us, although also at relatively low levels compared to the European practice. For reference, we mention that neighbours France (48.4%) and Belgium (47.3%), followed by the Scandinavian group Denmark (46.5%), Sweden (44.9%) and Finland 43.4%), are at the other end.
More importantly, though, while we are pursuing a convergence process and the accession to the Eurozone, we should note that Romania was in terms of the budget revenue share of GDP at just 64% of the EU average and 62% of the Eurozone average. And our evolution compared to the previous year was the second most negative as percentage points after Hungary, while European averages registered increases, in other words, we are totally going the wrong way.
Even the Hungarians, who have lowered their budget revenues compared to the GDP from 39.3% in 2016 to 38.4% in 2017, have a percentage higher by almost 50% (!!) compared to us, which have decreased from 26.5% to just 25.8% in the same time frame.
In fact, if we relate the decline to the starting base, we have “succeeded” a more pronounced decline than theirs (2.6% vs. 2.3% of the baseline). For Hungarians, we can call it adjustment, in our case, rather recklessness, given the needs of the budget and the commitments already made to increase salaries and social benefits.
More careful with the developments in the Union and with the synchronization of budget trends, in contrast to Hungary and Romania, other states in the former eastern bloc have taken care to increase their revenue collection by more than half a point, like the case of Bulgaria, Poland and the Czech Republic. That’s also because it is the only rational way to bring the budget deficit to the recommended level of -1% of GDP. Which was reached last year as a European average and which we met in 2015 after the tax easing hit us and we headed toward -3% of GDP.
- Total tax revenues and total contributions (% of GDP)
- EU average
If we refer to the EU accession year, the crisis year 2012 (when the tax cut was claimed by the economy re-launching) and the last three years analysed by Eurostat, data show quite clearly a decrease in convergence with the Eurozone toward which we move.
Or, without proper resources, including for the implementation of projects that we need to co-finance, even though we receive EU non-reimbursable funds, we cannot build a real approximation in terms of living standards reflected in health, education or infrastructure beyond the simple statistical reference to GDP per capita.
If we want to find solutions to reach a level of funding closer to the commitments made by the state, by revenue segments, the situation is as follows:
- Structure of public revenue by main categories (2017, % of GDP)
- Year Prod. (VAT) Revenue, wealth Individual Companies Social contributions
- EU average
- Source: Eurostat, own calculation
Therefore, the closest point to European practice is VAT (where we could go up to 100% if we improved the collection at least at a similar level to Bulgaria). Social contributions are below the overall average and should be increased, but it will be very difficult from a socio-political perspective to reverse the trend triggered by electoral reasons.
However, the biggest challenge will be (although it seems inevitable for taxes to increase per person and/or household, as they have reached an unacceptable level on long-term of 38% of the Eurozone average, namely half the same relative burden applied on companies, respectively 74%). Hence the average of only 48%, with which we cannot normally present ourselves at the entrance of the single currency area.
Of course, it will be argued that other newer EU members and those in the vicinity of the West have also lowered their taxes on income and wealth. Only that in their vast majority and at comparable economic dimensions, they did not make that so drastically as us (Romania reached 6.1%, compared to 7.3% in Poland, 7.4% in Hungary and 7.7% in the Czech Republic).
In addition, almost all these countries have offset by their taxes above the European average and the Eurozone on the production and VAT side (Romania 10.3%, below the EZ average of 13.2%, while Poland 14%, Bulgaria 15.1% and Hungary 18.2% in production and imports, of which Romania 6.2%, below the EZ average of 6.9% in VAT, where Hungary (9.5%), Bulgaria (9.0% ), Poland (7.8%) and the Czech Republic (7.7%) excel, not to mention Croatia (13.2%).The idea is that some arrangements can be imagined to obtain a level of acceptance from citizens, but these adjustments cannot be made in the same direction, and especially with our amplitudes, across the entire range of budget revenues.
Sooner or later, someone will have to take their courage in both hands and explain that an average score for the admission cannot be obtained with small scores, below the European average across the board.
Lăsați un comentariu
Romania's GDP exceeded Portugal’s in 2018: which has a population two times lower and a GDP/inhabitant twice as high
Romania's economy exceeded, at current prices in euros, Portugal's economy in 2018, a country with a population and a surface two times smaller as Romania.… Mai mult›
The Justice Ministry has prepared the two OUG drafts for which the coalition has put much pressure on the Justice Minister Tudorel Toader before granting… Mai mult›
ECOFIN / Tax havens list has been updated. Politico: Eugen Teodorovici took EU Finance Ministers by surprise
Finance Ministers of the EU voted on Tuesday at the third meeting of the Council for Economic and Financial Affairs (ECOFIN) chaired by Romania, the… Mai mult›
Dozens of companies, mayoralties, sports teams, public figures, organizations and many ordinary people joined the protest "Romania wants motorways". Of course, the country did not… Mai mult›
Facebook announced Thursday that it has closed hundreds of false accounts promoting false content in the UK and in Romania and this is the first… Mai mult›
Laura Codruta Kovesi was indicted on Thursday in a second case. The section for investigating the crimes committed by magistrates accused her of having led… Mai mult›
The draft law on the so-called repatriation of Romania's gold reserve is either a populist diversion or another attempt to remove gold from the administration… Mai mult›
The protest of magistrates from Cluj Napoca. More than 200 prosecutors and judges, with white bands on their arm, came in front of the local… Mai mult›
Laws on judiciary, amended again by OUG: judges who were once prosecutors may be appointed as prosecutors
The Government approved on Tuesday an OUG that was not publicly debated, which amends several provisions from laws on the judiciary that refer to prosecutors… Mai mult›
"Iceberg" operation: ANAF announces that it selected 487 companies which are to be audited based on risk analysis
Virgil Pirvulescu, Vice President of ANAF at PwC Annual Tax Conference The National Agency for Tax Administration (ANAF) has identified 487 large and medium-sized companies… Mai mult›
Commissioner Corina Cretu: There is a risk that Magurele Laser will not be completed during this budget implementation
In the absence of a rapid response from the Romanian Government to the European Commission, there is a risk that Magurele Laser can no longer… Mai mult›
The Presidential Administration announced on Friday that President Klaus Iohannis, "as the head of Romania’s foreign policy decisions and Romania's representative at the external level,… Mai mult›
Further to the message on the impact of OUG 114/2018 transmitted on Thursday to the organizations in the Coalition for Development of Romania (CDR), AmCham… Mai mult›
Finance minister stopped borrowing money from the market. Teodorovici: We have funding resources for minimum six months
Minister of Public Finance (MFP), Eugen Orlando Teodorovici, has ordered to stop borrowing operations on the market because MFF would have all the money needed… Mai mult›
BNR: If we sold foreign currency to defend Romanian leu, as PSD wants, interest rates would explode and ROBOR would go over 5-7 percentage points
The National Bank of Romania wants a "loyal cooperation" with the Ministry of Public Finance, and that involves a prior consultation with the central bank… Mai mult›