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March 1, 2021
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Social contribution reduction as of October 1, green-lighted

Timing is optimal, says FinMin Ioana Petrescu.

The Chamber of Deputies yesterday adopted in the initial form the law reducing social security contribution (CAS) by 5 percentage points for the employer as of October 1, rejecting, with 307 votes in favour, 7 against and 5 abstentions President Traian Basescu’s request for re-examination of the act. Prime Minister Victor Ponta and Finance Minister Ioana Petrescu, who urged the MPs to adopt the measure, were also present for the vote. The Chamber of Deputies is the decision-making chamber.
The timing of the measure to reduce CAS is the best, given the low level of interest charged by banks, Finance Minister Ioana Petrescu said during the debates on the bill in Parliament, Agerpres reports.
‘In the context where the European Central Bank (ECB) pursues a relaxation of monetary policy, this measure will incentivise economic operators to turn to investment through credit. The money that will be retained by employers after the reduction of the social security contribution will be used for more investment’, Petrescu explained.
The Minister of Finance stressed that the reduction of the CAS would not affect Romania’s commitments to its foreign creditors, nor would it alter agreed macro-economic target indicators. According to the MFP official, the measure in reality means a 20 percent reduction of the fiscal burden on labour, being the most important CAS reduction in the last 14 years. Overall, including health insurance and unemployment contributions, the social security contribution paid by an employer is 27.85 percent and the one paid by an employee is 16.5 percent. In 2012, Romania was number seven in Europe, the same as Latvia, in respect of the high level of CAS taxes, after Belgium, France, Germany, Hungary, Austria and Italy.
In his re-examination request, the president pointed out that the public social security budget would have a deficit of RON 12.519 bn in 2014 and, by cutting the rates paid by employers, according to labour conditions, as contribution to the public pension fund, the current deficit would increase by the negative financial impact estimated in the recitals to the law, varying from RON 4.860 bn in 2015 to RON 5.564 bn in 2018, to reach a public pension fund deficit of over RON 18 bn in 2015.

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