Romanian Finance Minister asserts that the proposed fiscal package mirrors discussions with the EU, striving for a favorable evaluation.
In a bid to curb the growing budget deficit and align with the European Union's directives, Romania's finance minister, Alexandru Nazare, announced a new fiscal package valued at approximately EUR 2.1 billion (around 0.56% of GDP) in early July 2025. The package, negotiated with the European Commission, aims to stabilise public finances and address the excessive deficit procedure (EDP).
Effective from August 1, 2025, the fiscal package introduces significant changes to tax and contribution structures.
**Value-Added Tax (VAT) Changes:** - The standard VAT rate will increase from 19% to 21%. - The two reduced VAT rates, currently at 5% and 9%, will be unified at 11%. This affects essential goods and services such as food, medicines, water, books, firewood, district heating, and sectors like hospitality. - There is a possibility that the VAT rate for hotels and restaurants will also be raised to 21% after an evaluation scheduled for October 2025.
**Excise Duties:** - Excise duties on fuel, alcohol, and tobacco will be increased. The government plans a partial refund scheme on fuel excise for freight and logistics companies to ease the transport sector's burden.
**Health Insurance Contribution (CASS):** - A new health insurance contribution will be applied on pensions exceeding RON 3,000 monthly, but only on the amount above that threshold. This measure introduces social security contributions for higher pension incomes.
**Banking Sector Tax:** - The special tax on bank revenues will double from 2% to 4% as of July 2025, excluding banks with assets below a certain threshold (details unspecified). This aims to increase revenues from the financial sector.
**Dividend Tax:** - The dividend tax rate will increase from 10% to 16% starting January 2026.
**Gambling Taxation:** - The package includes increased taxation on gambling activities, motivated by concerns over the social harm caused by gambling. Specific tax rates or modalities were not detailed but reflect a tougher stance on this sector.
The fiscal package also includes public spending cuts and reforms to improve the general government budget balance.
The Romanian Fiscal Council supports the package, emphasising its necessity in avoiding a sovereign credit rating downgrade and aligning with EU fiscal consolidation requests. The Council projects the package will reduce the budget deficit by about 0.6% of GDP in 2025 and have a larger impact of 3.35% of GDP in 2026 (including both spending cuts and increased revenues).
The measures, especially VAT hikes and excise increases, will likely raise consumer prices, affecting households and businesses, while higher banking and dividend taxes will boost fiscal revenues from wealthier sectors and capital income. The health insurance contribution on pensions adds a new revenue stream targeting higher pension incomes, which may impact retirees above the threshold. The partial refund mechanism for fuel excise attempts to mitigate adverse effects on logistics and transport costs.
In summary, the package represents a comprehensive fiscal adjustment combining tax increases across consumption, financial, and social sectors with spending reforms. It is expected to improve Romania's fiscal sustainability and meet EU deficit targets but may slow economic growth in the short term due to higher tax burdens on consumption and capital.
The fiscal package, announced by Romania's finance minister, Alexandru Nazare, in July 2025, aims to address the country's budget deficit and align with the European Union's directives. This package includes changes to various tax structures, such as an increase in the standard Value-Added Tax (VAT) rate from 19% to 21%, a unification of the two reduced VAT rates at 11%, and an increase in excise duties on fuel, alcohol, and tobacco. simultaneously, the fiscal package introduces a new health insurance contribution on pensions exceeding RON 3,000 monthly, a banking sector tax that doubles from 2% to 4%, an increase in the dividend tax rate from 10% to 16%, and increased taxation on gambling activities as part of the general-news and business landscape of politics in Romania.
