An International Monetary Fund (IMF) team, led by Joong Shik Kang, will visit Bucharest between September 3 and 12 for the annual Article IV Consultation with the Romanian authorities, Hotnews.ro announced, citing IMF representatives.
The IMF has recommended a comprehensive and controversial tax reform for Romania, designed to boost fiscal sustainability and fairness while supporting the country’s climate commitments, according to an IMF technical assistance report released on June 6. In the meantime, the authorities in Romania legislated a first package of budgetary reforms (tax hikes) and are going to promote a second one during the Fund’s visit to Bucharest.
With limited space to cut public spending due to a low expenditure-to-GDP ratio, the IMF’s technical assistance package proposes a major shift in Romania’s fiscal structure. The plan includes transitioning from flat to progressive income taxation, increasing consumption taxes, and raising levies on capital. The aim is to mobilise revenue, incentivise formal employment, and curb tax avoidance while maintaining competitiveness for capital investment.
The IMF proposes replacing the current 10% flat personal income tax with a two-tier system of 15% and 25%, with the higher rate targeting top earners. It also recommends a reduction or full elimination of health insurance contributions to ease the labour tax burden – an unusual proposal given that 60% of insured individuals already do not contribute to the state healthcare system.
In comparison to the IMF’s recommendations, Romania increased several tax rates, including the VAT rate, the taxation of dividends (first package), local taxes (including property tax), and capital gains (second package). The contribution to the public health insurance scheme was broadened to include payments from close relatives of insured persons – who have been provided the same package of services as those directly contributing to the scheme.
iulian@romania-insider.com
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