Vladescu: We need progressive taxation, flat tax is no longer coping

“Romania is very much in need to switch to a progressive tax system applied on all incomes as of January 1st of 2011, pensions included, in order for the state to continue to work, and the 2011 budget will have to be built based on such a system,” says Finance Minister Sebastian Vladescu. In an interview to ZF, he says the current 16% flat rate can no longer prop up the budget considering recession will exceed 1.5% of GDP this year, and amid uncertain prospects for 2011. The minister is working on a global income taxation system, which will entail several tax brackets, with deductions for private pensions and health insurance. He says in order to stimulate consumption, the VAT will need to be cut in 2011. The profit tax would likely fall to 15% next year in order for Romania to preserve its fiscal competitiveness, but Vladescu will not give up the minimal tax on companies’ revenues.