Social security contributions will be 3% lower as of next year, as they are slated to drop to 49.5%, down from the current 52.5%, according to Finance minister Mihai Tanasescu.
The minister thus tries to make good on his promise to keep cutting these contributions, the highest among the European Union candidate countries.
Still, you shouldn’t rush to plan your next year’s budget based on the minister’s recent statements. First of all, the 2004 consolidated budget draft, proposed by the Finance Ministry, has not been accepted by the International Monetary Fund.
Furthermore, Mihai Tanasescu himself admitted before the talks with the IMF delegation that a cut in social security contributions could by no means exceed two percentage points. The IMF favours a cut in salary taxation, but is concerned about the administrative inability to collect this type of revenues.
According to Finance Ministry experts, 3% is as far as the State can go in cutting the contributions, as the budget would not be able to deal with a bigger cut.
Government officials were even toying with the idea of a 5% cut in early 2003. However, experts feel such a reduction would entail too big an effort, as it would join the effects triggered by the VAT cuts. Consequently, should such a taxation cut be desired at all costs, other projects will have to be postponed or even cancelled.
The Finance Ministry keeps mum on plans to join all contributions under a single category. Several European countries are applying a single social security contribution quota and even merge it with the salary income tax (as in Holland, for instance).
Romanian companies are paying four types of contributions, whereas employees have to pay three categories of social security contributions, amounting to 35.5% and 17% of the gross salary.
Although the salary taxes are very high, the social security contributions’ share in the gross domestic product is among the lowest in the region, which points to the inability to collect these dues.
The Finance Ministry must figure out exactly how to make up for the drop in revenues, which occurs when tax cuts are applied, before the number of taxpayers increases (which eventually brings bigger revenues from smaller taxes). That is precisely why, as the IMF has recommended, the single Agency for collecting social security contributions should start operating next year. razvan.voican@zf.ro