Romanian entrepreneurs support keeping individual flat tax in place, caution against looming over-indebtedness

 Romanian Business Leaders (RBL), the representative foundation of Romanian private businesses, supports keeping in place the flat tax for individuals, without exceptions, doubled by state efforts to reduce and render its own expenses more efficient, RBL said in a release on Thursday.The businesspeople draw attention to the fact that the 2025 - 2031 medium-term national structural budget plan presented by the government to the European Commission for reducing the budget deficit is not clear about how the gap will be concretely narrowed and consider that over-indebtedness is looming as the only way to support, in addition to public investments, an inefficient state apparatus, unable of truly reforming itself."At the end of October 2024, the government of Romania unveiled the medium-term national structural budget plan for 2025 - 2031, a plan intended to reduce the budget deficit and which was tabled to the European Commission. Through this document, the government undertakes to ensure a budget-adjusting trajectory from 7.9% (estimated for 2024) to 2.5% of GDP in 2031. However, the plan does not provide clarity on how this reduction will be achieved in real terms. As representatives of the Romanian business environment, we are actively concerned about the lack of financial sustainability of the electoral promises. We are truly worried about the cost that will ultimately affect the economic milieu," the document reads.As the end of the year is the time for devising business plans for the future, the Romanian businesspeople point out that, in a context marked by unpredictability, their development plans are now replaced by strategies to adapt to the most pessimistic scenarios, noting that the government's plan provides for an increase of just 0.5% of GDP for the improvement of collection (where the fight with tax evasion really resides) starting in 2026, followed by an increase of 0.2% of GDP in 2031.Also, the plan foresees a cut of public personnel expenditures from 9.3% of GDP in 2024 to 8.9% of GDP in 2025, and 8.3% of GDP in 2031, yet without providing details about a true shake-up of the public apparatus.Instead, the assumed interest rates will increase from 2% of GDP in 2024 to 3.5% of GDP in 2031.The estimate of cuts in social assistance expenses from 12.5% of GDP in 2024 to 10.7% of GDP in 2031 is also unclear, as nothing is specified about a reform of pensions, social assistance or the health system, RBL notes. Forecasts regarding the increase in the public debt's GDP share start from 48.9% in 2023, follow a continuous upward trend to over 60% of GDP in 2026 - 2031, and subsequently decrease to 47.9% of GDP in 2041, the cited document underlines.In Romania's current electoral context, RBL compares the electoral programs of PSD, PNL and USR, noting that "We look at these political platforms with a sentiment of concern, since none of them clearly indicates how the budget deficit will be slashed, as shown by the downward trajectory outlined in the medium-term national structural budget plan for 2025 - 2031. Besides the need to cover the budget deficit for the expenses already included in this plan, in the current election campaign the politicians continue to promise tax cut or tax facilities, showing a lack of economic coherence. And, then, we ask ourselves: Who actually takes responsibility for this plan to reduce the budget deficit, who will actually implement it and who will ultimately bear the related costs? As the current government announces that it will not increase taxes and fees, just as all the electioneering political parties declare in unison, and, moreover, with promises of tax reductions being tossed about while expenditure-cutting structural changes are nowhere clearly announced, borrowing remains the only logical way to bring the necessary money to the budget," the entrepreneurs argue.In their opinion, this repetitive behavior, doubled by the lack of a vision of the current global economic and geopolitical context denotes heedlessness and lack of political responsibility, and they reference the recent example of Greece as a grim reminder in such a geopolitical setting.The Romanian Business Leaders Foundation (RBL) is an impartial, apolitical organization, serving as the the voice and the action vehicle of the leaders from the private business milieu.