OECD Recommendations to Romania: Increase Taxes, Eliminate Fiscal Facilities, Raise Retirement Age, Increase Monetary Policy Rate

Not even a week has passed since the announcement of Romania’s starting accession negotiation to OECD that the organization has already begun recommending measures to the Eastern European country. Among the recommendations, the most prominent regard the increasing of taxes, the elimination of fiscal facilities and the rise of the retirement age for specific population categories.

The increasing of taxes, especially for properties, should cover the country’s low level of tax collection in the OECD’s expert opinion. This already sounds like a contradiction, as, instead of recommending the improvement of the tax collection by tackling tax evasion, the experts recommend Romania increase taxes. But the high level of taxes led to the high level of tax evasion in the first place. This is not going to solve the problem, in our opinion.

Apart from that, OECD recommends the Government cut facilities for some categories. In Romania, there is a public debate about the opportunity of cutting the facilities for IT developers. The IT industry generated 9 billion EUR in 2021, and IT exports are the highest. By eliminating tax facilities for developers, Romania would significantly decrease the revenues of this industry.

Retirement age is already a subject of jokes in Romania. Men retire at 65, while women at 61. Meanwhile, the life expectancy in the country is 72 for men and 79 for women. If the retirement age for men is increased even more, to 70, let’s say, half the persons in Romania could work their entire life, according to OECD recommendations. The experts don’t state clearly, but they suggest the retirement age to be equalized for men and women, without mentioning the retirement age.

As for the recommendation to increase the monetary policy rate in Romania, this is already being increased every two or three months. The National Bank of Romania has just set the monetary policy rate at 2%. And it is going to be increased even more. Actually, one of the ways the state is fighting inflation is the monetary policy rate. But the recommendation is redundant, as Romania has already been doing that.

It seems that Romania is living a deja vu. The country passed through a similar period when the interest for the debts contracted from IMF burdened the country. All that time, experts from IMF, European Commission and all the other international financial institutions would come to Romania to tell the people that they have to suffer even more. Hundred of thousands of jobs were being cut during that time, and the salaries went down drastically,

Now it’s an entirely different time and context, but OECD plays an almost similar role. This happened before with the European Commission while negotiating the accession of Romania to the union; this happens now with OECD.