BUCHAREST, June 6 (Xinhua) -- The International Monetary Fund (IMF) is recommending broad tax reforms in Romania, including higher VAT, excise duties, and dividend taxes, alongside lower labor taxes, to help reduce the country's growing deficit, which reached 8.65 percent of GDP in 2024.
In a report released Friday, the IMF recommends shifting the tax burden from labor to consumption and capital, introducing a two-tier income tax system at 15 percent and 25 percent, and significantly reducing or potentially eliminating the health insurance contribution.
The measures, if fully implemented, could generate revenues of at least 1.2 percent of GDP in 2025.
Other proposals include taxing pension income or removing pension contribution deductions, raising excise duties on alcohol, tobacco, and fuel, and increasing the standard VAT rate from 19 percent to 21 percent.
The IMF also suggests replacing corporate tax exemptions with capped investment credits and lowering the threshold for microenterprise status.
The report emphasizes Romania's need for urgent revenue mobilization, citing one of the lowest tax-to-GDP ratios in the EU.
With limited room for spending cuts, structural tax reforms are deemed essential to bring the deficit below 3 percent of GDP by 2031. ■
