Romania’s Government made some important decisions yesterday to give the new cabinet space to implement its own governing program.

The Government led by Dacian Ciolos decided, among other things, to keep the tax on natural resources, the tax on the additional revenues of gas producers resulting from the liberalization of gas prices, and the tax on the natural monopolies of natural gas and electricity transmission and distribution for another year. These taxes were supposed to expire at the end of this year.

The Government also froze the salaries of all public employees and decided not to grant any bonuses, food vouchers, gift vouchers, and holiday vouchers, in the first two months of 2017, to allow the next cabinet to implement its own personnel strategy. The contribution to private pension funds was also frozen at the current level, of 5.1% of the gross salary, until February 28.

The Government explained that not making these decisions would have led to an increase in the budget deficit to over 6% of the GDP next year, with negative consequences for Romania’s economic stability. The next Government will have two months to decide what to do next.

However, the current Government didn’t agree to postpone the fiscal relaxation measures that will come into effect on January 1, 2017, including the VAT rate cut from 20% to 19%, and the elimination of the tax on special buildings and of the special excise on fuel. On Tuesday, the Social-Democratic Party (PSD) leader Liviu Dragnea said he had asked Prime Minister Dacian Ciolos to postpone these tax cuts by one year. If these taxes become effective, the future PSD Government will have less money to spend next year. The new Government may still be able to postpone the tax cuts if it is sworn in before the end of this year.

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editor@romania-insider.com