Fiscal Council Head Issues Alert: Increase in Romanian Taxes Necessary to Address Budget Deficit
Romania's Fiscal Council President, Daniel Dăianu, has stressed the need for tax increases rather than relying solely on expenditure cuts to address the country's high budget deficit. In a parliamentary address on May 27, Dăianu described the deficit as a "gangrene" for the Romanian economy and doubted the feasibility of correcting it solely through spending reductions.
According to Dăianu, relying on expenditure cuts alone is an illusion, with analyses conducted by the Fiscal Council supporting this stance. He suggested that increasing the state's fiscal revenues through tax and duty rises is unavoidable, although he conceded this is a personal opinion.
Romania's first four months of 2025 saw a 2.95% deficit-to-GDP ratio, with full-year projections reportedly set to reach or exceed 7%. Dăianu argues that a tax reform is crucial to rectifying the structural imbalance in Romania's public finances.
When questioned about potential savings of RON 30 billion through spending cuts alone, Dăianu expressed skepticism, pointing out the bulk of the public budget is held by salaries and pensions, which are difficult to reduce. He conceded there may be room to cut costs on goods and services, but these reductions alone would be insufficient.
Dăianu noted that Romanian society has been living beyond its means, cautioning that the fiscal burden does not only affect civil servants but essential public sector workers as well, such as teachers and doctors.
It is worth noting that Romania's incoming president, Nicușor Dan, does not prioritize increasing the VAT rate as part of fiscal consolidation, hinting that tax reform may focus on other tax bases or measures. The specifics of Dăianu's proposed tax reform have not been comprehensively detailed, but the message is clear: increasing taxes, alongside expenditure control, is essential for achieving significant deficit reduction and fiscal stability.
The fiscal council president, Daniel Dăianu, believes that increasing taxes is necessary, as expenditure cuts alone are insufficient to address Romania's high budget deficit, which he considers a threat to the economy. In light of this, Dăianu advocates for a tax reform to rectify the structural imbalance in Romania's public finances, acknowledging that significant deficit reduction and fiscal stability can only be achieved through a combination of increased taxes and expenditure control.
