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article imageContentious Romanian tax reforms signed off

By AFP     Nov 8, 2017 in World

Romania's leftwing cabinet signed off Wednesday on a package of tax and social security reforms widely criticised by trade unions and employers alike and which have sparked protests.

"These reforms will result in major gains for individuals and firms," Finance Minister Ionut Misa said at the start of a cabinet meeting. "Net earnings are going to rise, without additional costs to employers."

From January 1 the basic rate of income tax will fall to 10 percent from 16 percent, while small and medium-sized companies will be hit by a new tax of one percent of their turnover.

But the most contentious part is that from 2018 social security contributions will have to be covered entirely by employees, instead of being shared with employers at present.

The government has promised to compensate public sector workers through wage increases, but unions fear that bosses in private companies will not follow suit, potentially slashing take-home pay by 20 percent in some cases.

Several demonstrations have taken place, including at French automaker Renault's local Dacia works on Tuesday, and one of Romania's main union federations is collecting signatures for a petition towards a general strike.

Centre-right President Klaus Iohannis has also criticised the reforms, which still have to be approved by parliament, and unions have also said they will challenge them in the constitutional court.

Companies complain that their taxes and administrative costs will rise, reducing their competitiveness in an economy that has been growing strongly in recent years.

Several hundred people staged a fresh demo outside the government's headquarters on Wednesday but Prime Minister Mihai Tudose accused banks of abetting the protests by giving workers the day off.

"It would be better if they paid their taxes," said Tudose, 50, installed as premier in June after the ruling Social Democrats torpedoed their own government following an internal power row.

Romania's government is also attempting to push through judicial reforms that critics say will undermine the EU member state's fight against endemic corruption.

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