The Ministry of Finance last year began an analysis on the introduction of a progressive tax, according to the statements of the State Secretary of the Ministry of Finance Alin Andries.

“This inspection started last year. Although I have been in this position for a year and a few months, judging by the discussions with my colleagues, this kind of analysis happens all the time,” he said during a conference organized by PwC Romania.

According to him, the fiscal reform that we started (through PNRR no) has 2 components:

“1. Eliminating distortions caused by the fiscal system, that is, creating a more efficient and fair fiscal system. We have started this process by eliminating some objects or distortions, which will have a positive effect through the prospect of increased tax revenues and a fairer competitive environment.

2. Always the debate between a flat rate or a progressive tax is a technical and political debate.”

“At the level of the Ministry of Finance, we have this analysis. The consultation proposed by the BM was concluded with a report. The report contains an analysis of alternatives, not a solution, but a set of solutions. This will be a purely political decision. We will provide the technical base in accordance with the Government’s tasks and plan,” the State Secretary explained.

What scenarios has the World Bank developed when it comes to the introduction of a progressive tax in Romania

The World Bank put forward some ideas for the introduction of a progressive tax in a report in the summer.

Scenario 1: keep current rates, abolish personal income tax relief and increase the level of the basic benefit (personal deduction). Tax neutral impact as the increase in deduction is offset by the elimination of benefits.

Scenario 2: Increase income tax from 10% to 13% and introduce a refundable tax credit for low incomes.

Scenario 3: abolition of CAS deduction, introduction of three progressive rates of personal income tax from work (6% for incomes up to 80,000 RON/year; 12% for incomes from 80,001 RON/year to 189,000 RON/year; 18% for incomes over 189,000 RON/year) and the introduction of a refundable tax credit for incomes with reduced wages.

Scenario 4: Abolition of CASS, abolition of CAS deduction and introduction of three progressive rates of personal income tax from work (10% for incomes up to 42,000 RON/year; 20% for incomes from 42,001 RON/year and 100,000 RON/year ; 25% for incomes over 100,000 RON/year).