Coalitia pentru Dezvoltarea Romaniei argues for capping social security contributions

Coalitia pentru Dezvoltarea Romaniei (CDR), a private, non-political initiative gathering the most representative organizations for the business environment in Romania, was at the origin of the controversial idea floated by dismissed finance minister Dan Valceanu of capping the social security contributions - specifically the 10% contributions to the public health system.

Capping the contributions would encourage employers to pay higher wages and spur the development of the middle class. The high wages are already paid in such a way to optimize the tax and contribution payments, experts quoted by Profit.ro claim.

Speaking of the labour taxation and the social security contributions in Romania, and how they compare to other models in Europe, it is relevant to note that (i) the very low level of wages in Romania and (ii) income taxation, public health systems and pension systems vary a lot across European countries, therefore, concluding “high labour cost” is not straightforward.

As a general rule, the taxation (particularly effective) in Romania must be low, judging from the budget revenues to GDP ratio and the public expenditures for public services (education, health) as a % of GDP.

Separately, tackling specific issues (such as capping health system contributions) and not the whole taxation system (including, for instance, property and wealth taxation) would lead to biased results.

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