Article written by Cezar Petrescu, Senior Public Policy Analyst @Issue Monitoring
Romania’s fiscal landscape experienced significant activity in November 2024, ranging from tax policy updates and inflation concerns to evolving political discourse. Below is a structured summary of the key highlights and developments, reflecting the challenges and opportunities shaping the fiscal framework.
Political Party Platforms on Fiscal Policy
Romania’s main political parties revealed differing fiscal visions, as highlighted in their platforms:
- PSD (Social Democratic Party): Committed to maintaining the income tax at 10%, corporate tax at 16%, and general VAT at 19%. PSD emphasized tax policy stability, pledging to consult with the business sector before implementing changes.
- AUR (Alliance for the Union of Romanians): Proposed a 2% turnover tax for companies with revenues under €5 million, a 16% profit tax for companies with revenues exceeding €5 million, and a minimum tax of 1% of turnover for businesses with revenues above €50 million, guaranteeing fiscal stability for at least 10 years.
- PNL (National Liberal Party): Focused on incentivizing employees through share-based dividends, maintaining the flat tax rate, and preserving the €500,000 threshold for micro-enterprises taxed at 1%.
- USR (Save Romania Union): Advocated for reduced taxation, asserting that “work should be encouraged, not taxed,” and proposed VAT collection only at the final point of sale to consumers.
Inflation and Monetary Policy
Inflation Trends
Inflation rose to 4.7% in October, up from 4.6% in September. Food prices showed consistent increases:
- +4.75% compared to October 2023,
- +4.61% compared to December,
- +0.75% compared to September 2024.
Service costs and global trends, such as surging vegetable oil prices (+7%), contributed to this inflationary pressure. Romania continues to lead the EU in inflation, recording a 5% annual increase, well above the EU average of 2.3%.
Monetary Policy
The National Bank of Romania (NBR) maintained the 6.5% monetary policy interest rate to control inflation. Governor Mugur Isărescu linked inflation to rising wages and external factors, pledging to lower the rate only when inflation stabilizes sustainably.
Key Fiscal Measures and Policies
Tax Amnesty
The government extended the deadline for tax amnesty applications to December 19, 2024, while the intention notification deadline remains November 25, 2024. This extension provides taxpayers more time to clarify their fiscal obligations. Additionally, excise duties on alcoholic beverages will rise gradually, starting January 1, 2025.
EU VAT in the Digital Age Package
The EU Council reached an agreement on adapting VAT rules to the digital age. Key components include:
- Mandatory electronic invoices,
- Real-time data reporting,
- Enhanced cooperation agreements for digital transactions.
This legislative package awaits formal adoption and publication in the EU’s Official Journal.
Economic Indicators
Romanian Wages
Romania’s average annual adjusted salary increased to €17,739 in 2023 (up from €15,864 in 2022) but remains among the lowest in the EU. Comparatively:
- EU average: €37,900,
- Luxembourg: €81,100 (highest),
- Bulgaria: €13,583 (lowest).
EU Minimum Wage
Romania enacted legislation aligned with Directive (EU) 2022/2041, ensuring adequate minimum wage levels based on purchasing power and wage growth. This milestone fulfills a key requirement of the NRRP (Milestone 392).
Digital Transformation in Fiscal Oversight
The Ministry of Research proposed a draft order defining procedures for granting, suspending, or withdrawing the status of Qualified Trust Service Providers. This status, granted by the Romanian Digitization Authority, applies to entities issuing qualified electronic signatures. The order is expected to take effect within 90 days of its publication.
Conclusion
November 2024 underscored Romania’s complex fiscal landscape, characterized by rising inflation, political uncertainty, and evolving tax policies. Despite challenges, the government made strides in aligning with EU regulations, ensuring fiscal incentives, and addressing wage disparities.
Romania’s path forward depends on the outcome of the December elections and the commitment of political leaders to uphold fiscal promises. Issue Monitoring remains dedicated to providing real-time alerts and analyses to help stakeholders navigate these critical developments effectively. Register for a free demo here!
