Romania Faces €11.8 Billion Tax Gap Under Flat Rate System

Former Minister Advocates for Progressive Taxation to Boost Revenue and Reduce Inequality

Romania is potentially forfeiting billions of euros annually due to its flat tax system, according to former Minister of Labor, **Marius Budăi**. He argues that a shift to progressive taxation could significantly bolster state revenues and create a more equitable financial landscape for citizens.

The Case for Progressive Taxation

**Marius Budăi**, a social-democratic deputy, highlighted that Romania is among a select few European Union nations still employing a single personal income tax rate. This 10% flat tax applies regardless of income level, impacting minimum wage earners and high earners identically.

He stated on Facebook that a reformed system with a three-tiered progressive tax structure (6%, 12%, and 18%) could lead to 0% or a minimal tax burden for lower earners. This approach, he contends, is essential for Romania’s fiscal health.

Projected Budgetary Gains and Social Impact

Official simulations suggest that transitioning to a progressive tax system could inject an additional €11.8 billion into the state budget, representing a substantial 25% increase in income tax revenues. **Budăi** believes this reform would simultaneously alleviate economic disparities.

The proposed changes aim to provide a slight income increase for the lowest 10% of earners, while those at the top would contribute more proportionally. This, he asserted, would foster a more just, efficient, and humane tax framework.

“Progressive taxation is not a punishment for success, but a form of responsibility and solidarity. The current system sometimes favors rents and income from capital (which are poorly taxed), while salaries – even doctors, teachers, engineers – are taxed in blood.”

—Marius Budăi

The former minister emphasized that progressive taxation aims to correct existing imbalances, such as the under-taxation of capital income and rental earnings, which disproportionately affect salaried professionals like doctors, teachers, and engineers. Countries that have adopted similar systems have seen positive results in reducing inequality and improving public services, he noted.

Indeed, many developed economies utilize progressive tax systems. For example, in 2023, Germany’s average income tax rate was approximately 41.9%, significantly higher than Romania’s flat 10% but structured progressively to ensure higher earners contribute a larger percentage of their income (Statista, 2023).

Rethinking Romania’s Fiscal Policy

**Budăi**’s proposal frames progressive taxation not as punitive, but as a mechanism for shared responsibility and societal solidarity. He argues that the current flat tax system inadvertently benefits capital gains and rental income while placing a heavier burden on earned salaries, even for highly skilled professions.

The push for fiscal reform comes at a time when many European nations are reviewing their tax policies to address economic recovery and social equity. Romania’s potential to raise significant revenue and foster a fairer distribution of wealth through a progressive system remains a key point of discussion.