Romania's Budget Crisis: Will Tax Hikes Solve the Problem?

Romania Faces Budget Deficit Crisis: Tax Hikes on the Table Romania is grappling with a substantial budget deficit, prompting the government to consider drastic measures. Experts warn of a potential crisis if immediate action isn't taken. The 2024 deficit stands at a concerning 9.3% of GDP. Proposed solutions include increasing the VAT from 19% to 21%, and raising income tax from 10% to 14%. "The consumer will feel the increase in VAT," says Ionuț Grama, owner of a local grocery store. "We just collect it and pass it on to the state." However, economists point to a larger problem: inefficient tax collection. ANA reports that 30% of VAT refunds are improperly issued, resulting in a loss of 225 million lei. This highlights the need for improved tax collection alongside any tax increases. The government is currently exploring various scenarios to address the deficit, weighing the economic impact of each option. The situation underscores the urgent need for effective fiscal policies to stabilize the Romanian economy.