Romania Sets Out to Slash Taxes
February 19, 2015 Taxation in Romania
BUCHAREST – Romania hopes to create at least 325 000 new jobs by cutting income taxes, VAT rates, excise duties and dividend taxes.
On February 18th the government proposed an extensive number of tax cuts aimed at boosting economic growth, and fostering job creation, while easing some of the harsh austerity measures implemented over the last four years.
The measures proposed include the reduction in the rate of VAT from 24 percent to a rate of 20 percent on all goods and services, excluding meat, fish, fruits and vegetables, which would see an even lower rate of 9 percent.
The changes would take effect in January next year, with a further 2 percent cut proposed for the following year.
Other proposed changes include the removal of the currently active 1 percent tax on new construction projects, cuts to the rates of several excise duties including alcohol and fuel.
The government has also proposed that the flat rate of income tax faced both by individuals and businesses should be slashed from 16 percent to 14 percent, while social security tax paid by employers and employees should also be cut from 15.8 percent to 13.5 percent, and from 10.5 percent to 7.5 percent, respectively.
Further, in order to encourage greater levels investment into the national stock market, and to push businesses to list on the exchange, the government has proposed that the dividend tax faced by local companies, currently set at 16 percent, should be abolished entirely.
it is expected that the cumulative effect of the cuts should boost consumption enough to warrant the creation of at least 325 000 new jobs, while boosting GDP growth by 1.7 percent.
Photo By: Sorina