Ruling Coalition in Romania to Implement Higher Taxes

The ruling coalition in Romania is about to implement new taxes on gambling and dividends, carbonated soft drinks and tobacco and alcohol.

The Fiscal Code revisions have already been finalized. Still, the Social Democratic Party (PSD) and the Liberal Party (PNL) have already agreed on several crucial points. According to Prime Minister Nicolae Ciuca, the dividend tax will increase from 5% to 8%, the excise duty on alcohol and tobacco will go up, there will be a 40% tax on gaming profits, and there will be a tax on sugary soda beverages.

This comes after Romanian President, Klaus Johannis assured the Romanian people in May that taxes won’t rise in 2022. It seems like the ruling coalition’s endless debate on taxes resulted in an agreement since Romania’s economy started to collapse.

Adrian Codirlasu, financial analyst and vice president of CFA Romania, affirms on ZF, that he agrees with the decision to increase tobacco and alcohol taxes.

These increases can be justified. It does not create discrepancies, but it removes them. If I look at tobacco or carbonated soft drinks, they are not strictly necessary products, and the reduced VAT reaches the standard rate. It is reasonable, given that these products are harmful to health and involve higher medical expenses.

Adrian Codirlasu, financial analyst and vice president of CFA Romania

While expressing support for more reforms, Marcel Ciolacu, the head of the Social Democrats, acknowledged that some of them—including progressive taxation—would undoubtedly not go into effect in January 2023, when the other fiscal amendments are planned.

The Social Democrats would enforce deductibilities for gross wages below EUR 900, resulting in a tax rate of 0% on EUR 500 gross wages.

Additionally, Social Democrats would impose progressive taxation on “special” pensions exceeding EUR 1800 (40%) and EUR 3600 (90%) in turn.

The gross salaries in the public sector exceeding the Romanian President’s gross wage would be imposed a 40% income tax (instead of the standard 10% rate).

Liberals vehemently opposed the Social Democrats’ proposal to impose a 0.5 percent income special tax on businesses with yearly revenues above EUR 100 million.

The draft law enacting the tax hike has not yet been released, so it is unclear when the additional taxes will go into effect or their impact on revenue.