Prime Minister Ciolacu warns Romania may Lose 500 million euros without European Commission agreement on taxation milestone in Recovery Plan

Prime Minister Ciolacu states that Romania risks losing 500 million euros if there is no agreement with the European Commission on milestone 206 of the National Recovery and Resilience Plan (NRRP) regarding the taxation of micro-enterprises

Prime Minister Marcel Ciolacu mentioned that there is an ongoing dialogue with representatives of the European Commission to find the best solutions, when asked about the fact that the EC considers the taxation of micro-enterprises to be too lenient. „Indeed, if we do not reach an agreement, Romania risks losing 500 million euros for not meeting milestone 206,” Ciolacu added. „I think we are going to have a public discussion and involve those affected. I do not support the change,” the head of the Government stated, according to News.ro.

„All these things in the NRRP were not inserted by Marcel Ciolacu. They were added by Cîţu and Mr. Ghinea. They were the ones who signed these items in the NRRP. The fact that they forgot to announce you, because it was a secret what was included in milestone 206, that’s something else. I am in dialogue with the Commission, and we are trying to find the best solutions. Indeed, if we do not reach an agreement, Romania risks losing 500 million euros for not fulfilling this milestone,” Marcel Ciolacu claimed, when asked about the subject, in a press conference held on Thursday at the Palace of the Parliament, at the end of the National Political Council session of the PSD.

When questioned whether Romania will lose the funds or if the threshold for micro-enterprises will be lowered, the PSD prime minister answered: „I think we are going to have a public discussion and involve those affected. I do not support the change.”

On January 27, Marcel Ciolacu said that Romania still has issues with Milestone 206 of the NRRP, with the European Commission considering that the taxation of micro-enterprises is too lenient.

„Certain measures were taken primarily because they were included in the NRRP. They are listed in Milestone 206, which is in the third payment request, and some questions have already been raised. And I have already publicly announced that there is a problem with Milestone 206, with micro-enterprises, because the Commission considers that not all measures were taken to close this area, where they consider the taxation to be too lenient for a country the size of Romania. Usually, they ask for a taxation system that is applied in offshore areas,” Ciolacu stated then in Bihor.

Milestone 206 of the National Recovery and Resilience Plan refers to the revision of the Fiscal Code. „The new law will amend the Fiscal Code to gradually reduce the scope of the special tax regime for micro-enterprises. The reduction of special provisions begins in Q1 2023 and is completed by Q4 2024,” the respective milestone from the NRRP indicates.

Furthermore, the European Commission warned, on Wednesday, that Romania is falling behind with the reforms it needs to carry out in exchange for EU recovery funds, and its fiscal deficit in a busy election year is worrying, jeopardizing access to billions of euros from the NRRP.

Representatives of the European Commission have requested the threshold for micro-enterprises to be lowered from 500,000 euros to 50,000 euros this year to increase budget revenues and close loopholes for tax optimization, government sources stated on Thursday.

„We are negotiating to lower the threshold for micro-enterprises gradually, but not this year. The European Commission requested 50,000, we are trying to negotiate for a higher threshold,” the sources mentioned.

The Commission’s representatives publicly requested on Wednesday in Bucharest, during a press conference, that the government lower the threshold for micro-enterprises to continue receiving funds from the NRRP.

In response, the Minister of EU Funds, Adrian Câciu, stated that one milestone is the threshold for micro-enterprises, but the Government considers it fulfilled. „The Commission has a series of observations regarding the ceiling up to which a micro-enterprise should be considered a micro-enterprise,” the minister declared.

He further stated, „The Government of Romania leads Romania. The European Commission may have opinions. We are in discussions. Technical discussions will continue. We are doing the reforms for Romania. Obviously, opinions can be different. We dismiss these opinions until these reforms are made in the interest of Romania. Reforms must maintain their purpose. The way a reform is applied is contextualized. Romania has a specific approach to a type of reform; we do not just make a reform and ignore the positive or negative effects. We are interested in positive, structural effects. These are discussions, nobody is reproaching us, these are normal discussions. And I believe our joint objective is for Romania to have a consolidated fiscal situation at some point,” Câciu declared.