Employees and companies in Romania gained close to 16 billion euros, following the application of the flat tax, an "enormous amount" not possible under the former 2004 tax grid, Minister of Economy and Finance Varujan Vosganian announced in a press conference, on May 22.
He stressed that the supplementary amounts for employees and firms are almost equal, with some eight billion euros each, as a result of the flat tax of 16% applied to the wages and to the profit tax, compared with a profit tax of 25% and an average wage tax of 27% (according to a progressive system) in 2004.
In 2005, earnings of employees and firms stood at 2.4 billion euros, in 2006 – 3.1 billion euros, in 2007 – 4.4 billion euros and in 2008 – an estimated 5 billion euros.
Minister Vosganian referred to a report recently presented by the Social Democratic Party (PSD, in opposition) on the 2005-2008 governance, in which it says that Romanians had to lose from the application of the flat tax, also stating that if PSD gained the past elections, it would have applied a progressive taxation – 14, 26 and 38% and that two thirds of Romania’s employees, including medical doctors, professors, military and justice staff, and everyone with at least two jobs, would have entered the upper taxation echelon.
He also said that PSD report started from two contradictory hypothesis, on one hand accusing a growing Romania’s foreign disequilibrium due to a rise in consumption, therefore an income surplus and on the other hand an income drop.
Vosganian underscored that the flat tax application did not lead to a drop in budgetary revenues, but on the contrary they surged from 30.1% of the GDP to 34.4% of the GDP in 2007 and are to exceed 35% of the GDP in 2008, a predicted 35.9%.
Revenues generated by the salary tax rose from 7.1 billion lei, in 2004 to 14.4 billion lei in 2007 and the forecast is of 18 billion lei in 2008 (a 2.5-fold rise), and those from the profit tax advanced from 6.48 billion lei in 2004 to 11 billion lei in 2007 and the forecast is of 14.5 billion lei in 2008 (a 2.3-fold rise).