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Postponing new income increases, waiving new tax cuts, recommendations of Fiscal Council president

daniel daianu

The President of the Fiscal Council, Daniel Daianu, recommends postponing new increases of incomes / salaries, stopping the promises that generate unrealistic expectations in citizens and restructuring the state apparatus given that, according to him, the acute deficit of fiscal area is increasingly dangerous.

Daniel Dianu argues, in an article published on the institution's website, that without being a "tax haven", Romania has reached the penultimate position in the EU as level of tax revenues, adding that in the EU the average tax revenue ranges at 39-40 oercent of GDP, while in emerging economies in the East it exceeds 34-35 percent of GDP.

"Tax revenues went down by omission and commission. Through public decisions that changed the fiscal regime, a position embraced by almost the entire political spectrum; some parties because they saw a social reparation for the austerity applied after 2010; other parties because they believe in higher receipts at lower taxes (thesis often invalidated by reality). By omission, I affirm, because the need to increase transparency, the degree of compliance with payments were neglected, so as to collect more. Not only was a serious reform of the ANAF [the National Agency for Fiscal Administration] inexplicably discarded, but there were no systematic concerns to increase collection. Eurostat data show, for example, that as regards the VAT, Romania has the highest degree of non-compliance - 36 percent in 2018," shows Daniel Daianu.

According to the president of the Fiscal Council, while a decrease in tax revenues, only partially offset by the absorption of European funds was accepted, the pressures on the budget increased by the increase of the incomes / wages. This resulted in a smaller fiscal area, a "terrible strain" on the public budget.

"And the increase of incomes in the budgetary sector has distorted the relation with the wages in the private sector; it has become more and more attractive for many citizens to find jobs in the state apparatus, despite the accentuation of the labor force deficit in large areas of the economy," Daniel Daianu further shows.

According to the president of the Fiscal Council, the new pension law would have a more than severe impact on the public budget, given that its implementation would mean pluses of 0.7 percent of GDP in 2020, 2.7 percent of GDP in 2021 and 3.7 percent of GDP in 2022.

The president of the Fiscal Council concludes that the deterioration of the international economic environment is catching us off guard, in the sense of a large fiscal area deficit.

Daianu states that it is not possible to go on with the reduction of public investments as a share of GDP and the fiscal / budget revenues must be increased. He also advocates for greater transparency, restarting the ANAF reform, severe penalties for those who avoid taxation through all kinds of ploys and waiving new tax and duty cuts, and stopping promises that generate unrealistic expectations in citizens.

Daianu also shows that it is necessary to restructure the state apparatus and must try to apply the "golden rule" which can exempt from co-financing projects financed from common budget resources and validated by the European Commission as serving simultaneously national needs and needs of the EU.

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