2010, the year European countries embrace the deficit challenge

Ana Sabiescu, 5 Feb 2010

Romanian version

The steps taken by the governments to respond to the global economic downturn with taxation measures focused on raising state revenues to head off a further deepening of the budget gaps. In Romania, the deficit-closing measures lacked effectiveness and some of them burdened businesses even more.

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Romania’s budget gap remains high

Governments of all countries have taken a set of measures in 2009 to fight the soaring budget deficit, and some of them sought more extreme remedies.

Romanian government wasn’t immune to the crisis, or to the sharp decline in tax revenues, but the plan put in place by the Romanian authorities failed to narrow the budget gap, but only managed to contain it within the target range agreed with the International Monetary Fund.

“The Romanian government has taken a number of steps to try to close the gap in budget revenue, such as ending deductibility on fuel for VAT and personal income tax, as well as imposing a presumptive tax on businesses and a minimum tax on small enterprises. But the budget deficit remains high at around 7.5%”, said Nicolae Done, Senior Tax Partner at KPMG.

However, half of the third and fourth tranche under the rescue package from the IMF (€2.3 billion) will be go to the Ministry of Finance at the end of this month to bridge the budget gap, and the other half will go to the central bank.

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