Romanian employees pay highest income tax and contribution rates in EU

Income taxes and social security contributions paid by Romanian employees sum up to the highest rate among European countries, according to a comparative study conducted by financial consultancy firm KPMG.

Romania has the highest labor taxation rate (40.85%, as a share of the minimum gross wage) of the 26 countries surveyed in the European Union, the European Economic Area and Switzerland that have a minimum statutory wage, according to the KMPG report.

Notably, the taxation on the lowest wages in Romania is significantly higher than the effective tax rate in other Central and Eastern European countries: 17.86% (Slovakia), 22.40% (Bulgaria), 29.29% (Poland), and 33.5% (Hungary), according to KPMG.

“Surprisingly or not, countries with a low minimum wage have higher tax costs for employees. While Ireland, the country with the highest minimum wage in the EU / EEA / Switzerland, has an effective tax of 24.07%, Romania, the country with the second lowest minimum wage in the EU / EEA / Switzerland, has an effective tax rate of 40.85%,” concluded Mădălina Racoviţan, Consultant Partner Fiscal and Head of People Services, KPMG in Romania.

However, the study only mentions the taxes and contributions paid by employees and not those covered by employers as well. Romania moved most of the social contributions for salaries from employers to employees at the beginning of 2018.

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