Influential investor says Romania won’t be able to keep single tax rate any longer

Romanian investor Dragos Anastasiu, the owner of the Eurolines transport and tourism group and president of the Romanian-German Chamber of Commerce (AHK Romania), expects a new Government to replace the single tax rate and scrap 400,000 jobs in the public sector. He thinks these are the only solutions for the Government to cover the rising expenses with pensions and public sector salaries.

“As a personal opinion, the single tax rate has no chance to survive, although I am a supporter of the single tax rate,” Dragos Anastasiu said at a meeting of German investors in Romania, quoted by Agerpres. “In 2020, 2021, 2022 and so on, there is not enough money to pay the public wages and pensions according to the current Pension Law and Public Wage Law,” he continued, adding that no party will dare to intervene in this area and cut pensions or public wages.

However, Anastasiu believes that the next Government may try to reduce public expenses by cutting the number of employees in the budgetary sector from 1.2 million to 800,000. Thus, 400,000 people may be laid off and made available for the private sector, which is confronted with a labor shortage. “It depends who gets out of there, because some of those people we may not need,” Anastasiu said, hinting to the poor performances of some employees in the public sector.

He also warned German investors that the next move will be a progressive tax rate, like the one in Germany, which will be hard to dispute. “It will be very difficult for us to argue that this is good in Germany and not good in Romania… Let’s hope this won’t happen, but it’s better to be prepared,” he said.

The AHK Romania president said his predictions are based on discussions he had with local politicians, all of whom believe that the single tax rate needs to be removed, although they don’t have the courage to say it publicly. “For the moment, nobody has the courage to touch the single tax rate, except for (former PM) Ponta. On the other hand, all of the central bank, (deputy governor) Florin Georgescu, (governor advisor) Croitoru, everyone within BNR is with the progressive tax rate,” Anastasiu said at the AHK Romania monthly meeting.

Romania introduced the single tax rate of 16% for individual income and corporate profits on January 1, 2005. In recent years, talks about eliminating the single tax rate have intensified as the public expenses have grown significantly due to populist measures such as increasing wages in the public sector and pensions.