Romanian Constitutional Court rejects the complaint on the draft law on fiscal-budgetary measures / New taxes and elimination of tax facilities may enter into force

The Constitutional Court of Romania (CCR) rejected the USR’s complaint, Court President Marian Enache announced on Wednesday. This means that the new taxes, the elimination of some tax breaks and the mini-reform of the administration can come into force if the law is promulgated by President Klaus Iohannis.

The most important provisions of the bill, according to Economedia:

• Micro-enterprises pay a 1% tax on turnover up to revenues of €60,000 per year and 3% if revenues exceed this amount. The government has dropped the 16% tax on profits if the rate of return exceeds 30%.
• Companies with a turnover of more than €50 million will pay a minimum 1% turnover tax. In addition to investment, excise duty, which is also a tax, will be deducted from total turnover. And the tax will remain at 16% of profits, but not less than 1% of turnover calculated according to the criteria set out. Instead, the government has decided to drop provisions that left NGOs without corporate sponsorship. Companies exclusively engaged in the distribution/supply/transport of electricity and natural gas are exempt from the tax.
• Banks will pay a 2% turnover tax in 2024 and 2025 and will revert to a 1% tax in 2026.
• A 0.5% turnover tax is introduced for oil and gas companies.
• Tax exemption in IT, construction, agriculture and food industry is maintained only for income below 10,000 lei
• Employees in construction, agriculture and food industry will pay Social Health Insurance contributions CASS.
• VAT increases for certain products. VAT of 5% is maintained on books, newspapers, magazines, museums and cultural events, firewood and heat supply. VAT increases from 5% to 9% on tickets for shows, concerts, cultural and sporting events, supply of social housing, supply of high-quality food, supply and installation of solar panels, solar thermal panels, heat pumps and other high-efficiency heating systems. Increases from 9% to 19% VAT for the supply of non-alcoholic beer and food with added sugar.
• Individuals owning buildings more expensive than €500,000 and cars more expensive than €75,000 will pay a special tax.
• Holiday vouchers will be increased to 1,600 lei, but a health insurance contribution of 10% will be payable and they will only be granted to people with a net income below 8,000 lei.
• Holiday vouchers may also be granted in cash. Meal vouchers will be granted as before.
• For self-employed workers (PFAs), the current system of thresholds of 6-12-24 minimum wages is maintained, but an additional threshold of 60 minimum wages is introduced.
• Excise duties on cigarettes and alcohol increase.
• Numerous measures to reduce budgetary expenditure.
• The national RO e-Sigil system is established to ensure the traceability of road transport of goods within Romania.
• Income whose source cannot be proven is taxed at 70%.
• The government has removed one of the local government reforms from the draft law on fiscal measures, according to the new draft published by the executive. This is the provision in the original draft, which said that local governments (town halls, county councils) could not spend more than 2.5% of their revenue on concerts, festivals, local days, etc.
  The government estimates that the measures will have a positive financial impact of almost 20 billion lei in 2024, while budget expenditure is reduced by about 3.37 billion lei.

Context

The Constitutional Court of Romania debated on Wednesday the referral on the draft law on fiscal-budgetary measures on which the Government has asked Parliament for a vote of confidence, Agerpres reports.

USR spokesman Ionuț Moșteanu announced that the complaint has been submitted to the Constitutional Court on the package of laws on which the Government led by Marcel Ciolacu has asked Parliament for a confidence vote.

„We have submitted to the general secretariat the complaint filed by USR, Forța Dreptei and PNL against the law by which Ciucă and Ciolacu put their hands deep into the pockets of working Romanians. As I said, we also found two liberals, Vîlceanu and Pecingină. There are 46 pages of unconstitutional articles, 13 articles of the Constitution trampled on by Ciolacu in this draft. I will give you some arguments. Some are procedural and I will read them. The conditions for holding the Government accountable have not been met. The Government has asked for a vote of confidence for a package of laws, 22 normative acts have been amended, it is not a unified bill, the condition of immediate application of the law has not been respected. It is eeny meeny miny moe. Some provisions apply on 1 October, some provisions apply next year, some in 2025, and the CCR has said on countless occasions that this is not right and has admitted unconstitutionality petitions. It has made it clear that when you take ask for a vote of confidence as a government you have to ask for a confidence vote on something urgent,” Moșteanu said at the Palace of Parliament.

„Today, now, we have blocked this law and this law will not come into force. Until the Constitutional Court judges, this bill is blocked, it is stopped, no tax will increase. As of this moment, practically, the law does not exist, it does not produce any effects (…) There are countless decisions from the last 20 years of the CCR on such cases. I don’t see how the CCR could, what contortions the CCR could make to say that this law of Ciolacu, which is a stew of everything, which violates 13 articles of the Constitution, I don’t see how they could say that this project is constitutional. Ciolacu is off at the moment. If he wants to reform, he must come up with a reform in Parliament, he has a majority, he can use it to pass bills through a fair debate, a debate in committees, a debate with employers’ organisations, with trade unions, a debate with all the people who are affected by this stupidity of his, this law that puts his hand deep into the pockets of honest people to feed him and Ciucă and their clique in the territory”, concluded Moșteanu.