National Bank Governor deems taxation as "suffocating"

The taxation burden in Romania is heavier than shown by figures at first sight, even if compared with the levels in other countries in the region. Businesspeople have been saying this for years. Yesterday, National Bank Governor Mugur Isarescu himself said it, too.

“Not everybody complaining about the taxation burden can possibly be out of their minds. An estimate of the economy not registered in the accounting books, which is very important for calculating the real taxation level, shows all those that pay are actually choked. Let’s not delude ourselves in the idea that the overall taxation level in Romania is low,” Isarescu said during the launch of the “Transition in Romania” book by Academy member Emilian Dobrescu.

According to Isarescu, the 30% share of the fiscal revenues in the Gross Domestic Product is “deceiving” by nature. This is because it points to a low taxation level compared with the overall taxation level in Europe, whereas the burden is actually carried only by a certain part of the economy that is registered in the accounting books and contributes to the budget.

The Governor explained more than 40% of the people in Romania live in villages and the clear contribution of this segment to the GDP formation was not showing in the budgetary revenues, though.

“I am not suggesting we are dealing with a GDP overestimate here, but relating the budgetary revenues to the Gross Domestic Product categorically points to a figure that is far from real. That is why the taxes levied on a certain part of the economy are suffocating, as if the share of the fiscal revenues were 50% or 60%,” Isarescu said.

The Finance Ministry will have no complaint about the too high taxation level, except for social security contributions, which it sets down to “objective reasons.”

“We must not generalise here. Taxation in Romania reaches an average level compared with the neighbouring countries, except for the workforce taxation. This is high, indeed, but it is due to a number of objective reasons that have accumulated over 14 years, to the imbalance between the number of retired people and the number of employees,” Finance minister Mihai Tanasescu says.

Mugur Isarescu, NBR Governor

Not everybody complaining about the taxation burden can possibly be out of their minds. An estimate of the economy not registered in the accounting books, which is very important for calculating the real taxation level, shows all those that pay are actually choked. Let’s not delude ourselves in the idea that the overall taxation level in Romania is low.

razvan.voican@zf.ro