Romanian State Inc., another loss-making enterprise

If public administration were a business, the Romanian Government Inc. would be a company with growing turnover and lenient creditors, since its spending keeps outgrowing revenues. In 2003, the Government will have revenues worth 6.4 billion dollars, up 18% as compared to this year, but will spend 7.8 billion dollars, 10% more than in 2002.[leadend]
The fiscal policy promoted through the 2003 budget draft will mainly aim at gradually easing the fiscal pressure, the Public Finance Ministry says in the Report on the State Budget Draft, but this statement is not fully supported by concrete stipulations.
One cut will aim at the social security contribution, which will decrease by 5% (with the cut almost equally distributed between the employer and employee). At any rate, this contribution was not a tax, but taxpayers’ money, managed by the Government under an insurance system. Then, the development tax included in the electrical power tariff will be cut by 1%. However, these easing measures will be “compensated” by other stipulations.
“Considering the increase of the profit tax for exporters (i.e. from 5% to 6%) and the increased number of non-deductible expenses from the profit tax, according to the new profit tax Law, I believe we can safely say the fiscal policy will be harder on companies in 2003,” says a consultant working with one of the BIG 4 financial audit and consulting companies.
Moreover, excises will also be bigger this year, which will enable the Government to raise 1.2 billion dollars from this source in 2003, 70 million dollars more than this year.
In fact, the Executive estimates indirect taxes to raise 4.6 billion dollars, $900 million more than in 2002, while revenues derived from direct taxes are projected at 1.35 billion dollars, slightly down.
Large investments in defence are triggered by the projected NATO accession – more than 10% of the state budget spending will head for the Army in 2003, that is 852 million dollars, almost 130 million dollars more than this year.
However, industry-related spending will post the biggest increase this year, up to 400 million dollars from $250 million.
Moreover, health is in line with the general increase of budget spending, unlike education, which will get 411 million dollars, up a mere 7% as compared to this year, although expenses increased by 10 percent.