Romanian Prime Minister discusses upcoming local government restructuring plan with municipal authorities
The Second Package of Reforms in Romania is currently making its way through the parliamentary approval process, following a streamlined procedure similar to the first package. This new round of changes targets local administration, state-owned enterprises (SOEs), and various aspects of taxation, pensions, and investment projects, with the primary goal of budgetary consolidation and deficit reduction.
Local Administration Reforms
The Ministry of Development has published proposals for local administration as part of this reform package. The government aims to continue investment projects under the “Anghel Saligny” local development program, which focuses on modernizing local communities. However, the 2025 budget for this program has been exhausted, so additional funds will be sought in upcoming budget adjustments. These reforms may have significant implications for the management of funds and investments, potentially leading to improvements in local services and infrastructure.
State-Owned Enterprises Reforms
The package proposes reforms to state-owned companies to improve fiscal stability and efficiency. While specific operational details are limited in public documents, the goal is to reduce waste, enhance performance, and improve the financial position of SOEs to contribute to reducing the public deficit.
Expected Effects on Public Spending, Tax Collection, and Local Services
The reforms are designed to reduce budget deficits by consolidating fiscal policy, increasing tax collection efficiency, and cutting public spending in certain areas. A notable fiscal measure is the imposition of a 16% tax on multinational companies’ payments to foreign affiliates when these exceed certain thresholds in categories like management fees and intellectual property, similar to the U.S. BEAT tax.
The tax reform also includes VAT increases (from 19% to 21%) and changes in dividend and excise taxes, which will raise budget revenues. Health insurance contributions on pensions over 3,000 lei per month are introduced, adding to fiscal receipts. Removing some tax breaks and exemptions aims to make the tax system fairer and more efficient, which should improve overall state revenue and potentially enable better local service funding.
In summary, the Second Package of Reforms in Romania is multifaceted, focusing on fiscal discipline through local administration improvements, SOE reform, and enhanced tax measures. These reforms are expected to increase tax revenues, reduce inefficient public spending, and support the continuation of key local infrastructure projects, thus improving the quality and sustainability of public services.
The reforms in the Second Package of Reforms in Romania also include policy-and-legislation changes in the realm of taxation, with the introduction of a 16% tax on multinational companies' payments to foreign affiliates and VAT increases. This policy-and-legislation adjustment is part of the general-news narrative focusing on budgetary consolidation and deficit reduction.
The proposed reforms to state-owned enterprises (SOEs) aim to improve fiscal stability and efficiency, which are vital components of the general news and policy-and-legislation discussion surrounding the Romania's Second Package of Reforms, as they contribute to reducing the public deficit.
