The idea of introducing a progressive tax scared many. Since the diagnosis of the economy is bad, international experts offer alternative ways to solve budget problems.
Such reports contain ideas and simulations. Experts with whom HotNews.ro spoke say that no one is forcing us to apply what we see in them, especially if there are possibly better solutions.
The strange thing is that the Government that commissioned this World Bank analysis is keeping the report secret, even though it would normally be published.
Experts say that the document is not intended only for the authorities. The problems should be known to the citizens. That would be fine.
We do not have similar impact studies in Romania with figures. The only one that comes close is the one done last year by the Fiscal Council, but the analysis isn’t really that applicable.
The World Bank is not advising us to introduce a progressive tax, it is simply offering an idea/solution to the problems created by governments
We should not accept a progressive tax, it is not mandatory. The World Bank shows us that we have a large structural deficit and we must reduce it. That is, we cannot remain frozen in Romania.
Their experts conducted simulations.
It is up to the Government what it will do.
The document, which HotNews.ro also got acquainted with, shows that the experts of the World Bank practically made a diagnosis of our economy.
In other words, it says that we have an unfair tax and tax regime, there are groups of people who are not taxed, which is an anomaly: construction, agriculture, food industry, IT.
The paper also shows us that we also have a microenterprise regime that creates distortions.
In other words, it shows us a confusing and complex tax regime that even tax experts do not understand very well.
This regime led to a very low level of revenues to the budget.
The World Bank shows us that we have made mistakes and have a reduced level of tax revenues.
An alternative to a progressive tax
The flat rate was destroyed by the introduction of exemptions and the “great tax revolution”, where contributions shifted from the employer to the employee. Then the income tax was also reduced from 16% to 10%. Thus, IT scientists, a privileged category, had to pay a little more as the tax burden on contributions increased.
It was just a tax trick to trick them.
(Additional exceptions were later introduced, see below)
A progressive tax, even if desired, cannot be applied immediately. We would have logistical obstacles. Difficult with all the tax returns. The deduction system must be well established. Also, it should refer to total income, not just wages.
If you want to have a single quota in the future, it might be worth doing as it was: 16%.
If you make 16%, you are left with very high contributions. So you have to reach him too.
How do you regulate it? Benefits from income tax and CASS in construction, agriculture and food industry (about 800,000 workers) should be abolished. If something is also to be done about the IT scientists of about 80,000 (probably a little more if you include government employees), a feasibility analysis needs to be done.
Most IT scientists work in other forms: micro-enterprises and PFA.
It is the Government’s right to choose what to do.
The problem is that if he wants to touch the incomes of some, the opposition is terrible, even from the liberal professions.
However, let’s not forget that the financial markets are not waiting that long to see if Romania will collect better.
*The text was created after discussion with several economists and tax experts. Ideas do not belong to us.
Photo source: Dreamstime.com
Read also:
The strangeness of the World Bank report: preferably a progressive tax on labor, not on total income / Abolition of reduced VAT rates on food and medicine
How to increase property taxes in Romania. What the World Bank says
How and when to abandon reduced VAT rates for food and medicine, according to the World Bank
What changes does the World Bank propose to micro-enterprises: lowering the bar to 250,000 euros from 2024
Source: Hot News
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.