Social Monitor: Romania lags dramatically behind peers in tax collection rate

In Romania, taxes represented 27% of GDP in 2022, well below the EU average of 40% but also below the average of comparable Eastern European countries: Poland (34%), Hungary (35%), Bulgaria (31%), according to the Friedrich-Ebert-Stiftung Romania Foundation quoting Eurostat data.

At a moment when Romania needs to thoroughly reconsider its taxation system in order to address the fiscal slippage, the Friedrich-Ebert-Stiftung Romania Foundation suggests that the progressive labor (income) taxation and slightly higher capital taxation is the most common model in the European Union.

Romania's tax structure focuses more on consumption compared to the rest of the European Union, the report published by the foundation argues. Taxes on consumption represent 37% of the total taxes collected in Romania, ten percentage points more than the EU average.

In the EU, countries tend to focus more on labor taxes, which represent 51% of total taxes collected, eight percentage points more than in Romania. Labor is taxed progressively in most EU states, bringing with it a more equitable distribution of the tax burden between low- and high-income earners, while Romania applies a single tax rate that perpetuates social inequalities instead of reducing them.

Also, capital taxes are lower in Romania, representing 20% ​​of all taxes collected, compared to the EU average of 22%.

Consumption taxes tend to be quite regressive; that is, they place a proportionally greater burden on those with lower incomes than those with higher incomes.

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