Romania's tax agency chief resigns after announcing disappointing Jan-May revenues

The president of the tax collection agency ANAF, Lucian Heius, admitted that the agency's revenues in the first five months of the year lagged by 6%, or RON 8.9 bln (EUR 1.8 bln, 0.6% of GDP), behind the target of RON 148 bln (EUR 30 bln) and he resigned.

The Government is thus forced to operate a negative budget correction precisely when the teachers insist on higher wages and other budgetary sector employees have similar expectations as well. Essentially, it is a problem of (insufficient) revenues and only partly of inefficient expenditures (with the exception of special pensions and weak investment prioritisation).

The European Commission's Semester report clearly pointed to both the labour tax and capital tax as lagging behind EU averages. The VAT gap issue (typically the main suspect for weak revenues) is real, but it generates rather market (or competition) distortions, as the consumer taxes in Romania are in line with the EU averages (high VAT frauds are compensated by a high effective VAT rate).

ANAF's outgoing head Heius also admitted that the gap between the actual tax collection and the target has constantly widened from RON 3 bln in the first three months of the year to RON 5 bln at the end of April and RON 8.9 bln a month later, Profit.ro reported. The gap is expected to reach RON 22 bln (EUR 4.4 bln, 1.2% of GDP) by the end of the year.

The revenues collected from the large corporate taxpayers were particularly disappointing: RON 8.5 bln, or more than 12% below the RON 69.7 bln target.

The disappointing performance is reportedly an effect of the inaccurate (overly optimistic) projections for the revenues derived from the energy sector – partly understandable given the frequently changing regulations. The solidarity contribution owed by OMV Petrom was initially estimated at EUR 1 bln, while after regulatory adjustments, it will actually be EUR 300 mln.

President Klaus Iohannis returned the latest bill passed by the lawmakers on the 'cap and subsidy' mechanism on the grounds that it lacks clarity and may generate complications.

Overall, however, the EUR 4.4 bln lower-than-planned (1.2% of GDP) discrepancy expected for the whole year is of a magnitude that puts the Finance Ministry, as the author of the budget planning, in a delicate situation.

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