Romania Ups Taxes on Richer Civil Servants

Prime Minister Victor Ponta on Sunday said the government would slap a new tax of 16 per cent tax on the salaries of state employees earning more than 4,500 lei (1,000 euro) a month.

He said the tax was required during a difficult time, and would not bring a lot of new money into the state budget, but would send a sign of "solidarity" to the general population.

"I've already agreed with the Finance Minister to find a way to change the law in order for the extra tax to be legal," Ponta said.

"There are still some people in the public sector who earn too much compared with the majority of the clerks. They have to pay more."

The "solidarity tax" could be applied next year, and will be separate from the existing flat tax on salaries of 16 per cent.

The ruling coalition of leftist Social-Democrats and Liberals has announced plans to apply differentiated tax levels starting 2013 if it wins a majority of seats in the parliamentary elections in autumn.

In a related development, the government has recently increased public sector wages by 8 per cent from June 1 and with further 7.4 per cent from December as a measure to restore them to pre-crisis levels.

Romania is dependent on a 20 billion euro rescue package from the IMF, the European Union and the World Bank. It obtained the loan in May 2009 in exchange for agreeing to push through austerity measures aimed at taming the country’s deficit.

In July 2010 the government cut civil servants' wages by 25 per cent, while thousands of state jobs were axed and VAT was increased by five percentage points to 24 per cent.