Romania’s Medium-Term Structural Fiscal Plan indicates the increase of the single rate to 16% from 2025, from 10% at present, and the Value Added Tax (VAT) to 21% starting from 2026, declared on Sunday, October 20, the former Secretary of State for Finance, Gabriel Biriș.
Biriş, specialist in taxation, partner at Biriş Goran and founder of The Tax Institute Association, discussed with Agerpres about the fiscal perspectives for the next two years.
“We are in a very delicate situation, we, the taxpayers, who have to endure any changes in the tax legislation, because we do not know what to expect. None of the main parties have come up with any concrete measures. I am only talking about generalities: we will reduce spending, we will improve the collection, we will reduce the deficit. At the moment it is very difficult to speculate. It is possible that we will end the year with a deficit of 8%, which means that the discussions now in Brussels, a gradual decrease in the deficit on 7 years, with 0.7% per year, could generate a greater need for adjustment in 2025 and the discussion we can have is whether it can be done only by increasing some taxes A deficit adjustment by 0.7%. of GDP and even over 1% of GDP can be extremely easily done without any increase in taxes”, stated Gabriel Biriş.
He claims that a 0.7% adjustment of the deficit and even a doubling of this figure should reduce the fear that there will be extraordinary changes, such as the VAT increase.
“If we look at the material published in the press and which is not official, because it was not assumed, at the indicators regarding budget revenues and their structure, from page 14, we see that in total tax revenues we have 16.2% of Estimated GDP this year, we have 17.2% for the year. It is not an increase that worries us, but it is a bit shocking that we have an increase from 2.8% to 4% of GDP, that is 1.2 % of GDP, i.e. a 40% increase in income tax. Should they prepare to increase the single rate? Because I don’t think they have the ability to introduce a progressive rate from next year the main fear, the increase in income tax. Until 2017, it was reduced by Dragnea to compensate for the increase in contributions had the transfer of contributions from the employer to the employee been neutral, the CSA should have been 21% and they made it 25%. CASS was supposed to be 8.8% and they made it 10%. And to compensate for this transfer from the state budget to the pension budget, in particular, to show that they have money for increasing pensions, they lowered the income tax. The total work load remained the same”, explained Gabriel Biriş.
In addition to all this, the taxation specialist mentioned that the Fiscal Plan sees “a strange increase” in VAT, starting from 2026.
“In 2024, VAT will be 6.8% of GDP, in 2025 it will remain the same, so we do not expect any changes, but in 2026 it will increase to 7.3%. Why? We have an increase of 0.5 percentage points per which if we compare it to 6.8%, you can’t do it, in the current context, except through tax increases? We see that none of the measures taken in this way the so-called fight against evasion, even the recent ROs, such as RO e-TVA, did not lead to the reduction of the VAT gap, it was constant, over 33%, sometimes towards 40%. 6.8% represents two thirds from what can be collected in theory. I think that the VAT gap can be reduced only through reverse taxation. At the last meeting, the minister told us that 35% of the gap The VAT comes from the carousel fraud, i.e. 3 billion euros, and even more from insolvencies”, Gabriel Biriş also said.
In this context, Biriş claims that we can expect the increase of the single rate to 16% from 2025 and the increase of VAT to 21% from 2026, and the impact of these two measures will be felt especially on consumption. The taxation specialist equates the impact of the VAT increase with one percentage point on consumption and three percentage points on income tax. The effect will be felt especially by people with low and medium incomes, but less so by those with high incomes, he appreciates.
He also added that he does not see a problem regarding the implementation of these measures, given that the introduction of the single rate of 16% was made through an emergency ordinance on December 29.
Source: ziare.com
