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January 16, 2022

Gov’t decides drastic cut in budgetary expenditures

Agriculture Minister loses the highest volume of funds, the only Ministry to receive additional funds being Labour Ministry.

The Government approved the ordinances addressing the first budgetary reappraisal of this year, introduces the minimal lump sum taxation and limits certain salary raises, the documents being conveyed for analysis to the European Commission and to the International Monetary Fund. Thus, the budgetary reappraisal discussed by the government last year resulted in significant cuts in the budgets of all Ministries, the largest volumes being eliminated from Agriculture, Defence, Administration and Internal Affairs and Education, and the only Ministry which receives additional funds is Labour Ministry.

The budget earmarked to Agriculture Ministry shall be diminished by little over RON 2 bln., and RON 696.4 M shall be reduced from Ministry of National Defence. Other significant cuts in funds shall be operated from Ministry of Education (- RON 676 M) and from Administration and Internal Affairs (- RON 427 M).
The only Ministry to receive additional budget is Ministry of Labour, Family and Social Protection, by RON 1.3 bln. in addition. The list includes budgetary cut also in case of Ministry of External Affairs (- RON 47.8 M), Ministry of Regional Development ( – RON 87.4 M), Ministry of Finances (- RON 95.4 M, compared to minus RON 61.5 M initially proposed), Ministry of Justice (-RON 61.2 M), Ministry of SMEs (-RON 7.2 M), Ministry of Environment (-RON 139.3 M), Ministry of Transports (-RON 203.7 M), Ministry of Health (-RON 22.5 M), Ministry of Culture (-RON 28.5 M), Ministry of Communications (-RON 19.5 M), Public Ministry (-RON 27.9 M), Ministry of Economy (-RON 47.5 M), Ministry of Youth and Sports (-RON 42 M), Ministry of Tourism (-RON 39.9 M). Reductions in budgets are also considered in case of Presidential Administration (-RON 6 M), Senate (-RON 15.3 M), Chamber of Deputies (-RON 36 M), High Court of Cassation and Justice (-RON 6.2 M), Constitutional Court (-RON 1.02 M).

Other institutions whose budgets will be diminished are National Agency for Integrity (-RON 1.8 M), Romanian Inteligence Service (-RON 53 M, compared to minus RON 135.2 M initially proposed), External Inteligence Service (-RON 8.9 M, as against minus RON 17.9 M initially), Service for Protection and Guarding (-RON 8.4 M), Special Telecom Service (-RON 53.3 M).

Ministry of Finances shall receive RON 1.8 bln. (instead of RON 1.9 bln. initially proposed), but for inteersts (RON 1.7 bln.) and the fund for budgetary reserve (RON 417 M, instead of RON 500 M initially proposed), a cut by RON 371.1 M being foreseen for Romania’s contribution to the EU budget.
In case of Environment Ministry, RON 757.6 M are to be reduced in case of external non refundable funds. PD-L vice president, Gheorghe Flutur, former Minister of Agriculture, specified, this Monday, after the session of the coalition, that the budget of Agriculture Ministry shall be fed from State Treasury to limit the effects of the emergency ordinances.

RON 811 M shall be reduced from the VAT breakdown for decentralised expenditures, including for funding staff expenditures in state pre-university system. More than RON 38 bln. (accounting for 19 – 20 per cent of total expenditures and 7 per cent of GDP) shall be allotted to investments.

boc targets: economic recovery, resumption of lending in economy and salvage existent jobs
“Our target is to support the economic recovery, to secure lending resumption and to rescue existent jobs, and where this is possible, to create new jobs”, PM Boc said.

PM underlined that prior to the official signing of the loan agreement with the EC and IMF, there are “several positive signals”. “On one side, RON decline ceased and EUR – RON rate stabilized. On the other side, we already see a reduction in bank interests and we are confident that these positive effects amplify further on, after the adoption of these normative documents, as well, along with the first installments from the EC and from IMF”, PM explained. On Saturday, PM assured that the budgetary employment salaries shall not be reduced and no layoffs are foreseen. “It has been decided that we do not dismiss 5 per cent of the civil servants and that we provide salary raises depending on the funds collected to the budget, starting from the basis of the pyramid, with low and medium salaries”, Emil Boc said. Regarding the raises and bonuses, these will be paid depending on each Ministry.

In his opinion, from among the outcomes of this normative act, from the viewpoint of economic activity recovery, there is also the one based on which the most important taxes remain unchanged. “The single taxation quota remains at 16 per cent and it does not change. VAT remains 19 per cent and it does not change. Social insurance contributions remain the same”, PM said.

Following the adoption of this normative act, which provides for a budget reappraisal, 20 per cent of the budget remain for investments. “We shall not sacrifice investments in this country because these are the only solutions to maintain and create new jobs. Therefore, in percentage terms, this amount remains for investments. Over the next time period, we consider not to charge taxes on reinvested profit as well as to reduce the number of taxes, duties and fees, basedon the schedule released by Finance Minister”, Boc said.

Regarding the lump sum measure provided by the ordinance, this is meant to mitigate fiscal evasion and to contribute to its elimination.

PM also spoke about the medicines compensated by 90 per cent for pensioners having incomes below RON 600 in the sense that they will continue to benefit from this. The provisions addressing temporary unemployment remain valid.

Pogea: the investments will be over RON 38 bln. in spite of budget reappraisal

By providing the lump sum tax, the revenues to the state budget are expected to advance by more than RON 350 M, according to Finance Minister, Gheorghe Pogea. He assured that the lump sum tax was not introduced because of the current difficult economic situation but because this was a measure planned long before, with the aim of eliminating failures in income statements. Finance Minister underlined that the investments continued to account for a large share in budget, which is the most important aspect. The Executive decided that lump sum tax is enacted on May 1. this means that micro-enterprises, regardless making profit or not, will have to pay a minimal tax of EUR 500 per year.

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