Budget strains may prompt likely tax hikes for Romania, as advised by a presidential advisor.
In Romania, the need for tax adjustments or even an increase seems imminent, as advised by Dragos Anastasiu, an advisor to acting President Ilie Bolojan. Speaking at a public discussion on the country's fiscal standing, Anastasiu's remarks come at a time when Romania faces a public deficit surpassing 9% of GDP in 2024. The government has delayed implementing fiscal consolidation measures ahead of the presidential elections.
When questioned whether either of the two presidential candidates, George Simion or Nicusor Dan, could bypass tax increases, Anastasiu replied, as reported by Digi24, "It will be quite challenging. If we had taken action since last year and carried out the necessary steps in the first four months, I believe we could have avoided the tax increase."
Anastasiu further indicated that the new administration will likely have limited room for maneuver due to the current fiscal imbalances. He suggested, "There will definitely be at least a tax adjustment where it is genuinely necessary."
Romania is under pressure to submit a detailed consolidation plan to the European Commission under the Excessive Deficit Procedure. The outgoing cabinet has already proposed a package that includes VAT and dividend tax increases. The markets have reacted cautiously, with bond yields rising and the leu weakening due to political uncertainty post the first round of presidential elections.
Anastasiu cautioned against implementing tax hikes without considering their economic impact. He warned that such an approach could cause significant damage to economic growth.
Enrichment Data:- The presidential candidate Nicusor Dan has set a budget deficit target of 7.5% of GDP for 2025, which remains challenging without additional measures.- Romania is projected to see moderate real GDP growth in 2025 and 2026, but the imposition of tax hikes could dampen this growth by increasing costs for businesses and consumers.- Tax adjustments must be carefully managed to avoid triggering social unrest or political backlash.
The imminent tax adjustments or increases, as advised by Dragos Anastasiu, could significantly impact Romania's business sector, causing concerns about its financial stability and potential effects on economic growth. Furthermore, the new administration, whether led by George Simion or Nicusor Dan, may have limited room for maneuver due to the current fiscal imbalances, and any decisions concerning taxes will be closely monitored within the context of Romania's general news, politics, and business environment.
