BUCHAREST: Romanian President Klaus Iohannis urged the government on Thursday to reconsider a planned overhaul of taxes that he said could hurt the economy and risked breaching the European Union's rules on budget deficits.
A major trade union representing public and private sector employees meanwhile said it planned to call a general strike. Economists and investors have also expressed concerns about the measures, which the government could approve on Friday to take effect in January.
"I urge the coalition to show it is responsible and abandon this type of fiscal policies that are generating mistrust and are not helping anyone," Iohannis told reporters.
"I am seriously warning political decision-makers to be careful ... to not throw Romania into an economic adventure with a sad ending."
Fiscal policy uncertainty has weighed on the leu currency and Romanian bonds and stocks even though the economy is the EU's fastest-growing so far this year.
The proposed changes include cutting income tax to 10 percent from 16 percent and lowering social security contributions while shifting their burden entirely onto employees.
The minimum wage will rise, while contributions to a mandatory private pension scheme will be capped.
Employers will pay a 2.25 percent tax on their overall wage fund and small companies with annual turnover below 1 million euros will pay a 1 percent tax on turnover instead of the current 16 percent tax on profit.
If approved, the measures will come into effect on Jan. 1, giving employers less than eight weeks to prepare.
On Wednesday, representatives of Romania's largest local and foreign investors' associations criticised the Social Democrat-led government for making repeated and sudden fiscal changes without proper consultation or assessing their likely impact.
"The lack of confidence is unanimous given that structural fiscal policy measures are being made without ample consultations with the business sector," said Daniel Anghel from the Coalition for Romania's Development.
On Thursday, a trade union representing 500,000 workers in healthcare, education, public administration and transport said it had started the process of calling a general strike to protest against the tax changes on a date yet to be decided.
Shifting the burden of social security levies solely onto employees is intended to help the government offset a 25 percent wage hike for nearly a million public sector workers that is already approved for January.
But some fear removing payroll taxes for employers will effectively mean a pay cut for many private sector workers, as companies are not obliged to pass their savings on.
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