Is it time to change the taxation of income from wages?

Romania has been in the excessive deficit procedure since 2019, and the reduction of the budget deficit is a pressing issue. In recent years, several fiscal measures have been mentioned in the public and political space, including the reform of labour income taxation. The FIC believes that the basis of any decision must be an impact analysis, which is complete and focused on the medium-long term.

With this document, we want to outline a first overview of the economic context of Romania, some possible scenarios, practices in other EU countries, some proposals from the FIC, but also the summary of the recommendations of the World Bank, OECD, IMF, and the European Commission on the subject of labour income taxation. This short analysis is a first basis for future debates, but for a complete picture, the effect of such a measure on total budget revenues must be quantified, as well as the effect on the economy. At the same time it should be taken into account that various categories of budget revenues have different elasticity coefficients.