Two of Romania’s ruling coalition leaders have signaled that the country will eventually adopt a progressive taxation system, though both parties agree that the current economic and social conditions are not yet suitable for such a shift. The Liberal Party (PNL) and the reformist USR party have previously argued against progressive taxation.
Deputy prime minister Tanczos Barna, a former minister of finance and senior figure in the Democratic Alliance of Hungarians in Romania (UDMR), told broadcaster Digi24 that the recent value-added tax (VAT) increase could have been avoided only by adopting a measure of similar fiscal impact – such as progressive taxation.
“There are few forms of tax that could replace a VAT increase,” Barna admitted. “Progressive taxation could be a solution if this coalition had believed that Romanian society was mature enough or that the middle class was sufficiently consolidated. We will reach progressive taxation sooner or later.”
Barna explained that the decision to maintain the flat tax rate in 2025 was taken after internal discussions within the UDMR and coalition talks with the Social Democratic Party (PSD) and National Liberal Party (PNL), noting that mid-year implementation would have been disruptive. He described the VAT hike as “not desirable, but necessary.”
Separately, PSD interim president Sorin Grindeanu echoed Barna’s remarks, stating during a Romania TV interview on July 15 that the flat tax system will eventually be replaced by a progressive model.
“It will all get there. All developed states have this progressive tax, which takes more from those who earn more,” Grindeanu said, as quoted by Digi24.
He added that the PSD had advocated for progressive taxation during coalition negotiations and maintained a minority position when the VAT increase was chosen instead.
“Only three states in the EU are left without progressive taxation. All others apply it with good deduction systems for health, education, and other key expenses,” he noted.
Romania currently applies a flat income tax rate of 10%, introduced in 2005. The push for change comes amid rising pressure to reform public finances and broaden the tax base in line with European standards.
iulian@romania-insider.com
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