Thousands protest in Bucharest over government’s plans to hike taxes on employees

Thousands protest in Bucharest over government’s plans to hike taxes on employees
By Carmen Simion in Bucharest October 5, 2017

Thousands of workers from the public sector protested in Bucharest on October 4 against the government’s plans to transfer social security contributions from employers to employees. Trade unions claim the measure would reduce net incomes.

The protest is likely to put pressure on the government, considering it may be followed by more rallies. During the electoral campaign last year, the Social Democratic Party (PSD) promised considerable wage hikes and tax cuts. After taking power, the PSD-led government has embarked in a spending spree, raising wages in the public sector, the minimum salary and cutting some taxes, despite warnings from the International Monetary Fund (IMF) and the European Commission that the budget could exceed the 3% of GDP threshold. 

The new social security system should come into force as of next year. Labour Minister Lia Olguta Vasilescu has already admitted that most of the announced 25% rise in the gross wages in the public sector will be absorbed by the new definition of the gross wage — namely the new gross wage will include, after January 2018, the social security contributions currently paid by the employer.

The protest was organised by Cartel Alfa trade union in from of the government building and was attended by workers from various sectors including healthcare, transport and the police. The protesters gathered from all around the country and asked the government to scrap its decision to transfer social security contributions to the employees.

“The government’s proposal to transfer social security contributions from the employer to the employee represent a singular experiment, whose negative consequences will be (once again) borne by the workers,” Cartel Alfa said in a statement.

“The payment of social security contributions entirely by the employee is not applied in any other EU country. On the contrary, in most countries, the employer’s share is higher than that of the employee because companies also have social responsibility,” the trade union statement read.

Talks between the prime minister and the leaders of the trade union ended inconclusively. The leader of Cartel Alfa, Bogdan Hossu, said after negotiations with Mihai Tudose, that “it has been decided that the non-transfer of social security contributions from the employer to the employee would be analysed,” while PM Tudose said there had been no decision on giving up the transfer, according to News.ro.

New talks will be held with all trade unions on October 6.

An analysis by PwC showed in June that social security contributions being borne entirely by employees may lead to a drop of 22% in take home pay. In order for the employees not to be affected by the increase in the fiscal burden, employers should raise their gross wages by 22.75%, the consultancy said. 

The Romanian finance ministry announced on July 27 that, according to the 2017-2020 governing programme, social security contributions will be cut by 4.25pp, from 39.25% to 35%, as of next year. At the same time, a cut in the income tax rate from 16% to 10% is taken into consideration. Healthcare and social security contributions will be borne by the employee, but the payments will continue to be made by employers. The ministry explained that the measure to transfer the contributions entirely to the employees will lead to higher pensions. 

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