IMF calls on the Government for compensatory measures for the social security tax cut

The International Monetary Fund (IMF) mission to Romania, headed by Andrea Schaechter, asked the Government to come up with compensatory measures to be applied together with the reduction of the social security tax CAS, according to Romanian deputy Andreea Paul. The Government hasn’t prepared any measures, she also said, according to Hotnews.ro. The IMF representatives said that they have a 2.2 percent budget deficit target for Romania this year and that poor budget revenues in the first four months of the year require that a CAS cut, which would mean less money to the state budget, should be accompanied by compensatory measures. These would be new taxes or additional cuts for the state spending, Andreea Paul explained after the meeting between the IMF mission and the members of the Parliament in the budget and finance committees. She also said that the IMF representatives and those from the World Bank and the European Commission, didn’t give any guarantee that the promised CAS cut will happen starting July 1, 2014 like the Government promised. The Government wants to reduce social security tax paid by local companies on behalf of their employees by 5 percent, from the current level of 20.8 percent. According to Government representatives, this would be covered, in terms of budget revenues, by the so called “pole tax”, which is the tax on special destination buildings, which Romanian companies have to pay starting May this year. “The CAS cut will generate its own multiplication effects in the economy which, in time, will counterbalance the decline in budget revenues due to the lower tax rate,” Cristian Socol, advisor to prime minister Victor Ponta, said, according to Agerpres. He added that the macroeconomic indicators allow Romania to relax its fiscal policy and this should be done before the country enters the Fiscal Compact to prepare for joining the Eurozone. The joined delegation of the IMF, World Bank and European Commission will stay in Romania until June 16, for the third review of the stand-by agreement. editor@romania-insider.com