Romania issues draft for legislative changes in local administration
Romania's Local Administration Reform: A Key Part of Fiscal Consolidation
The Finance Ministry in Romania has announced a comprehensive second package of fiscal and structural reforms, which includes the local administration reform, state-owned enterprises (SOE) reform, and special pension reform. The aim is to achieve budgetary consolidation and fiscal discipline, as well as strengthen public finances nationwide [1].
The local administration reform bill is designed to reduce Romania's record-high budget deficit by increasing revenues and controlling expenditures at all government levels, including local authorities [2]. The reform bill proceeds with limited parliamentary debate, faces opposition mainly from fiscal tightening critics, and impacts local budgets by imposing stricter financial discipline amidst broader tax increases [1][2][3].
Detailed measures targeting local administration are not extensively detailed in the available sources. However, the reform package includes broad fiscal tightening measures such as tax increases (VAT from 19% to 21%, dividend tax from 10% to 16%), stricter tax rules, and spending controls [1][2][3][4]. The draft bill for local administration reform, published on August 7 by the Ministry of Development, includes measures such as cutting the number of personal advisors employed and paid from the budget by top public servants by 6,060. It also proposes to downsize the recommended staff (minimum, medium, and maximum levels) in village halls to city halls and prefectures by 20% [1].
One of the key measures in the local administration reform bill is the improvement of property taxation. The draft bill aims to identify all properties and charge a 100% supplementary property tax for properties without a building permit over a period of five years. The recovery of unpaid local taxes will be passed to judicial officers [1].
The estimate of the budgetary impact of the local administration reform is incomplete and prudent, only accounting for savings from lower staff and not higher revenues. In comparison, the impact of the first package of reforms on the general government budget is estimated at 3.3% of GDP in 2026 [1].
The local administration reform bill follows a general outline provided by minister Czeke Attila, which includes higher revenues, lower spending, better tax collection, more local autonomy, and smoother functioning of institutions. The draft bill does not provide a detailed estimate of the potential higher revenues from the local administration reform [1].
The SOE reform is currently without a coordinator as deputy prime minister Dragos Anastasiu resigned. Meanwhile, the special pension reform faces fierce opposition from magistrates [1].
The opposition faced by the reform bill is not limited to parliamentary debate. The reform’s fiscal tightening measures have sparked controversy among businesses, taxpayers, and potentially local governments, as increased taxes and spending controls are often unpopular and may restrict local autonomy and financial flexibility [2][3]. While no detailed records of organized protests or specific opposition by local administrations have been found, fiscal austerity packages typically face criticism for social equity concerns and potential impacts on public service quality [5].
In summary, the local administration reform in Romania is a significant part of an extensive 2025 fiscal consolidation package aiming to strengthen public finances by increasing tax revenues, controlling spending, and improving fiscal governance at all levels—including local authorities. The bill proceeds with limited parliamentary debate, faces opposition mainly from fiscal tightening critics, and impacts local budgets by imposing stricter financial discipline amidst broader tax increases [1][2][3].
- The local administration reform in Romania, as part of the fiscal consolidation package, aims to reduce the nation's budget deficit by increasing taxes and controlling expenditures in both central and local governments, while also improving property taxation and property permits enforcement.
- The proposed local administration reform, following a parliamentary debate with opposition from fiscal tightening critics, could potentially impact businesses, taxpayers, and local governments due to the unpopular nature of increased taxes and stricter spending controls, raising concerns about financial flexibility, local autonomy, social equity, and public service quality.
