Ionut Dumitru, the chairman of the Fiscal Council, stated that, as tax evasion is widespread, the National Tax Administration Agency should set more ambitious tax-collection targets, Fin.ro reports. According to estimates, reducing tax evasion by 20 to 30 pc would result in an extra 2 to 3 pc to the gross domestic product (GDP), which would make a huge difference for the public budget.
Moving on to another topic, Dumitru claims that Romania’s pre-crisis budget deficit was leading the country to a soaring public debt. “We could have been facing a public debt soaring fast to 50 or 60 pc of GDP, in the context of a huge budget deficit. Therefore, the fiscal adjustment – the reduction of the budget deficit – was needed to check the unhealthy, fast-growing public debt”, the economist argued.
The tax adjustment process is now in an intermediary stage. “We started out with a budget deficit of over 8 pc of GDP, we reduced it last year to 6.5 pc of GDP, which is to shrink to 4.4 pc this year and, respectively, 3 pc of GDP next year. In other words, fiscal adjustment is not completed. We have to keep our commitment to reach a low budget deficit, under 3 pc of GDP. We need a low budget deficit to stabilise the public debt and to avoid its soaring to unsustainable levels,” Dumitru further stated.
Furthermore, in the latter’s view, there are countries which cannot sustain a debt corresponding to 15 pc of GDP, just as there are countries which can manage a much higher debt. In Romania’s case, he argued, the public debt critical level is, most likely, somewhere above 40 to 50 pc of GDP, beyond which investors could become reluctant to grant us further funding.