SIMILAR ARTICLES

Draft law: Tax regime for foreign companies’ profits obtained in Romania is changing

The Ministry of Public Finance (MPF) will propose to the Government another emergency ordinance for amending the Tax Code and the Tax Procedure Code, after… Mai mult

Ups! EU economy is slowing down, and that will inevitably affect us

The economy of the European Union recorded in the second quarter of 2019 the worst evolution of the last five years, with a quarterly increase… Mai mult

How we stand compared to Eurozone. Differences between economic indicators

Romania announced its intention to join the Eurozone in 2024. Adoption of the single European currency is not optional but included in the Treaty of… Mai mult

How did Estonia reach the world top in digitalization. INTERVIEW: Margus Noormaa, General Director of the Estonian Information System Authority

Estonia is well-known as a phenomenon of digitalization. On the official website of the European Commission it is mentioned to be „Estonia is probably the… Mai mult

Salaries in companies with domestic capital increase faster but remain half the level in foreign companies. Why

Salaries in domestic companies continue to grow as staff shortage widens, but remain half the level registered in foreign firms, according to an analysis by… Mai mult

Cronicile

Good news for deficit: Unitary pay law comes with all contributions transfer to employee. Effect – enthusiastic increases, largely neutralized by taxes

de Mariana Bechir 12.6.2017

The net wage increases generated by the unitary pay law will be neutralized, at least in the first year, by the transfer to the employee of all social contributions as of 1 January 2018.

That means that much of the wage increase will return to budgets in the form of taxes paid by the employee.

This is also the explanation for Minister Olguta Vasilescu’s statement, according to which some net salaries are to decrease following the wage increases – and the sensitive contradiction to the same minister’s statements, according to which the salaries below 4,000 lei would be doubled.

All that means that the salary increases will have a limited impact on the budget deficit, as the unitary pay law makes use of this innovation of transferring the contributions initiated last year by Secretary of State Gabriel Biris.

The mention appears in Grindeanu government’s view regarding the framework law on the remuneration of staff paid from public funds:

When estimating the impact of this law, states the document signed by the Prime Minister, “it was considered the fact that as of 1 January 2018, the provisions of the Tax Code will be amended so that the employee will take over the full state insurance contributions“:

How social contributions are paid now

At present, social contributions for normal work conditions account for 39.25% of the gross salary and are paid as follows:

Pension contributions26.3% for normal work conditions

  • 5% for the employee’s individual contribution
  • 8% for the employer’s contribution

Contributions to health insurance – 10.7%

  • 5% for the individual employee contribution
  • 2% for the contribution due by the employer

Unemployment contributions – 1%

The rates of unemployment insurance contributions that apply this year are as follows, also with the mention that they have also been applied in 2016:

  • 5% for the employee’s individual contribution
  • 5% for the contribution due by the employer

Contribution to the Guarantee Fund for the wage claims – 0.25%

  • paid by the employer

Holidays and social health insurance contribution – 0.85% (paid by the employer)

Work accidents and occupational diseases insurance contribution – 0,15% (paid by the employer)

Overall, calculations show that an employee (either from the state or the private sector) will pay from the gross salary additional contributions of 22.5%, instead of 15.75%. So, for the increase to also be seen in the net wage, it should be higher than the sum of the contributions transferred to the employee.

In the case that another measure from the government program will be complied with, total contributions of 39.25% will be reduced as of 1 January to 35% of the gross salary.

Regarding the state employees, the additional amounts implied by in this tax novelty will come exactly from the wage increases that appear in the pay scales.

The trend will also be followed for private employees

Once the transfer of contributions from the employer to employees takes place, the increase of gross salaries becomes pressing for private companies as well.

To maintain employees’ net salaries after the transfer of contributions, employers from the private economy will have to increase gross wages, in relation to the decrease of the companies’ costs for the contributions to state budgets.

Finance Minister: Impact on net salaries will be almost neutral

Ionut Dumitru, President of the Fiscal Council, has recently announced that the budgetary impact of the unitary pay law is almost double the one presented by the Government, amounting to about 60 billion lei, compared to over 30 billion, as in the Government’s estimation.

Now, after the transfer to the employee of all contributions has been added to the equation, things are easy to explain: basically, much of the “gross” increases granted to the state employees (by the unitary pay law) are neutralized by the increase in taxation on the employee side (by the Tax Code).

That has already been confirmed by Minister of Finance Viorel Stefan, who stated in his interview with Reuters that most of the wage increases will come back to the budget in the form of taxes:

“What the public opinion has not understood yet is that the wage increases from the public sector introduced by law include the social security contributions. That makes the impact on net salaries almost neutral.”

Also, the enthusiastic increases announced by the Minister of Labour, Olguta Vasilescu, by 50, 60 or even 100%, refer to the gross salary, which will also include the tax transfer. And anyway, the increases will be applied gradually, by 2022.

Staff costs in 2022 – nearly 107 billion lei

The impact is neutral only in the first year of application of the unitary pay law and in the coming years, with the 2022 horizon, it will grow year by year. According to the Ministry of Finance’s calculations, the financial effort for 2022 is 43 billion lei, which means a total of 106.9 billion lei staff costs in the state budget (a 67% increase in current expenditures of 64 billion lei).

The monthly minimum gross national wage is forecasted for the same year of 2022 to 2,500 lei.

Priority areas for wage increases

According to the explanations given Tuesday in the Chamber of Deputies, average increases will be 5 to 10%.

They will be applied first and to a greater extent to some categories of state employees (dignitaries, police officers, military personnel, doctors), as can be seen in the timetable of the unitary pay law.

Impact in 2017:

  • 55 billion for increasing the wages of police officers, military personnel and security guards, as well as dignitaries, and increasing the allowances for meetings granted to local councillors
  • 73 billion lei for holiday vouchers

Impact in 2018:

  • 3 billion lei for the increases (total for doctors and dignitaries, by 50% for teachers, by 25% – the basic salaries, military salaries and function salaries)
  • 3 billion lei, holiday vouchers
  • 8 billion lei, food allowance (in the equivalent of two minimum wages per state employee)

Publicly appointed office-holders:

  • The President of Romania (who will have a salary of 18,120 lei next year, because the minimum national wage will be 1,510 lei), the state advisers and presidential advisers
  • MPs (will have 13,590 lei next year)
  • Ministers, state secretaries and undersecretaries of state, secretary general of the Government, state advisers
  • The Ombudsman
  • The presidents and plenum members of CNSAS, Competition Council, the Permanent Electoral Authority, CNA, etc.
  • Mayors and deputy mayors, presidents and vice-presidents of county councils
  • Prefects and subprefects
Mergeți în homepage ›

Publicat la data de 12.6.2017

Lăsați un comentariu


NEWS

IMM Invest Romania – program implementing rules have been published

The Ministry of Public Finance announces that it has issued the methodological norms for the implementation of the Program for supporting small and medium-sized enterprises… Mai mult

Pollution import and car park expansion: comparisons with the other EU states

Romania is the EU country with the fewest cars in terms of the number of inhabitants, according to data recently published by Eurostat. We appear… Mai mult

Government is trying to save budget deficit: reductions in public administration system, cancellation of bonus for harmful conditions, excise duty on soft drinks

The Government is preparing the public for the first measures aimed at avoiding the budget slippage, which would be applied by the PSD-ALDE government. News… Mai mult

Laura Codruta Kovesi remains alone in the race for European Chief Prosecutor

French Prosecutor Jean-Francois Bohnert will be appointed as head of the European Financial Prosecutor's Office, a position for which he was heard on Thursday, 11… Mai mult

Romania - EU country with highest risk of dying in a road accident, Bulgaria is quickly decreasing number of victims since it built motorways

Romania recorded the highest road deaths in the EU also last year, with 96 deaths per one million inhabitants in 2018, almost double the EU… Mai mult

Latest developments in progress at Health Ministry: Differentiated wages based on performance, competitions organised at a regional level not by hospitals

Sorina Pintea announced on Thursday further new changes that will be brought to the functioning of the health care system, including new rules for employment… Mai mult

ANAF changes selection procedure for liquidators. Main changes

The new order on approval and selection procedures for insolvency practitioners is an important step to a very good direction, industry experts say. ANAF is… Mai mult

Romania loses competition for a seat at UN Security Council. MAE Excuse: Campaign started too late

Romania lost to Estonia in the final vote to get the non-permanent member position within the UN Security Council for the period 2020-2021. On Friday,… Mai mult

Business internationalization / eMAG makes a step to entry five new international markets and targets a business of EUR 2 billion

eMAG hopes to get the opinion of the Hungarian Competition Council over the next two months for the acquisition of Extreme Digital, the market leader… Mai mult

"At a distance from books": 85,000 teachers (one third of educational staff) are graduates of distance learning

Approximately 85,000 teachers are graduates of distance learning (ID) programs, Education Minister Ecaterina Andronescu said at a meeting with school inspectors from Caras-Severin County. The… Mai mult

Mugur Isarescu: We should make a film for Viasat History about treasure in Moscow

A book should be written or a movie should be made and sent to Viasat History about a treasure evacuated to Moscow, as it is… Mai mult

Rhythm of commercial vehicle registration increases 3 times faster in Romania than EU average

Today, the European Automobile Manufacturers Association (ACEA) announced the status of commercial vehicle registrations in EU member states + EFTA in April and cumulated after… Mai mult