The growing gray or black labor market, as a result of high labor taxation, is one of the Government’s main arguments for reducing the income tax from 16% to 10% and adjusting social contributions starting next year.

The other argument is stimulating foreign direct investments, according to a document from the Finance Ministry presented by local Profit.ro.

According to the document, there is a high number of employees currently working in the gray or even black area, which means that they don’t pay taxes. “In 2016, of the 6.2 million employees in Romania (according to INS-AMIGO), only 4.7 million employees paid taxes."

On December 31 2016, there were 1.129 million part-time labor contracts. The share of part-time contracts in the overall number of labor contracts has increased in recent years, reaching 18.1% in 2016.

The Finance Ministry also estimates that the income tax cut would boost foreign direct investments. The Government plans to cut the income tax from 16% to 10% starting January 1, 2018. Moreover, employees with salaries under RON 2,000 would no longer pay income tax.

The Government also wants to replace the current individual income taxation with a global household taxation.

editor@romania-insider.com