Cluj Day | Urgent tax reform demanded by the National Trade Union Bloc. NBS: “The model we have today is to blame for the high risk of poverty”

The National Trade Union Bloc (BNS) and the 29 affiliated federations demand an urgent fiscal reform, given that Romania builds its budget revenues on taxes on goods and services, especially VAT, and on social contributions paid almost entirely by employees, say the representatives the union organization in a press release.

According to the quoted source, the two categories provide 76% of the total tax revenues of the general consolidated budget.

“In the context of the protest that we will organize on Monday, May 13, 2024, in front of the Government of Romania, under the slogan “Respect for work and those who work! Workers in Romania no longer want to be guinea pigs of fiscal experiments!”. The National Trade Union Bloc draws attention to the fiscal system in Romania, whose situation is alarming and requires immediate attention”, the trade unionists claim.

According to the cited source, in 2023, the share of tax revenues in GDP was only 27.1%, well below the European Union average which was 40.4% in the same period. According to the union leaders, the situation is due, on the one hand, to a deficient arrangement of the tax system and, on the other hand, to chronic tax evasion.

“Today, Romania has one of the lowest wealth and capital taxation rates in Europe! From income tax and profit tax, Romania collects today only 4.7% of GDP as tax revenue. The European average is almost 3 times higher – 13.3%! Romania taxes profit at a rate of 16%, one of the lowest in Europe. Only Hungary and Ireland have a lower share,” states the NBS.

The trade unionists claim that dividends, interests, and royalties also have a preferential treatment, being among the lowest in Europe.

“Our country builds its budget revenues on taxes on goods and services (especially VAT) and on social contributions (almost fully paid by employees). The 2 categories ensure 76% of the total tax revenues of the general consolidated budget! Regardless of the level of income obtained or the level of well-being, Romania taxes the same. It is one of the very few member states of the European Union that has the same effective tax rate, both for incomes from work equal to the average salary, and for incomes twice higher than the average salary”, the statement says.

NBS: The fiscal system in Romania is currently one of the exceptions to the rule

The trade unionists also point out that the tax system in Romania is currently one of the exceptions to the rule.

“Repeatedly, the tax rates for the business environment, but also for certain professional categories, have been reduced, waving the slogan of a possible better compliance and collections. This did not happen. It is also the reason why the tax burden on labor is one of the highest in Europe, Romania having one of the lowest shares in GDP of income from social contributions and income tax from the EU bloc. The application of a single rate of taxation, combined with a significant level of tax evasion, has led to this paradox: the correct ones are penalized and punished to pay more to cover the financing needs of a state that is not able to apply a fiscal policy correct and fair. The effective exercise of the functions of the rule of law requires an adequate level of fiscal revenues. The way in which the tax burden is placed is a tool for redistributing welfare at the level of society and, at the same time, a measure that determines the reduction of inequalities at the level of society”, states the NBS.

According to the cited source, “the model we have today is to blame for the high risk of poverty, for exaggerated social inequities, for the massive migration of the active population, for the high rate of unemployment among young people or for the inability of the state to provide social benefits at a appropriate level”.

“The National Trade Union Bloc and the 29 affiliated federations demand an urgent fiscal reform. Thus, we expect you to join us on Monday, May 13, 2024, starting at 10:00 a.m., in front of the Government of Romania. The rally will be followed, starting at 12:00, by a march to the Ministry of Economy, Entrepreneurship and Tourism, the Ministry of Labor and Social Solidarity and the Ministry of Finance”, according to the document.