TAXATION OF EMPLOYEES IN ROMANIA IN 2018. CHANGES AND ITS RESULTS ON THE COUNTRY’S ECONOMY

Abstract

The politico-economic context has a significant influence on the development of a country and the visions of the decision-makers together with the economic policies implemented are key elements in a country’s economic welfare. A decisive aspect of the economic policy is the fiscal framework, and when it is not at least stable, the entire economy suffers. In the recent period, in Romania, there have been various tax changes. The present paper analyses perhaps the most controversial tax change, namely, the shifting of social security contributions from the employer’s burden to the employee, along with the reduction of their rate and the reduction of the income tax rate. Implementation of such measures should be examined in terms of economic impact. One can notice that these changes have impact on three stakeholder categories: employees, employers and the state budget. Moreover, these changes must be correlated with other measures that are not directly related to the fiscal framework. At the same time, seeing an overview, one can analyze whether these changes could actually represent a starting point for moving from proportional taxation to progressive taxation. Through several impact assessments, this paper aims to analyze both from a micro and macroeconomic perspectives this tax changes and to offer a clear overview of the economic issues arisen. Such analyses will demonstrate the economic instability created through these measures.