Preliminary assessment of the second payment request of Romania

sks is known to be high. It specifies that, when selecting taxpayers, data and information that will be taken into account will include, among others, activities in construction, hotel, restaurant and catering, vehicle maintenance and repair, and transport. These are activities where the incidence of using under declared / unreported work is known to be high. In addition, the same section states that in order to select for compliance and control activities a sample of taxpayers representative of compliance risk, risk criteria for the selection will include, among others, the economic potential in relation to the possible seasonality of the activity. Periodically, the management of the structures involved (Tax Antifraud General Directorate and the Labour Inspection) shall analyse the results obtained as well as the possibilities and perspectives for updating the plan, depending on the results found Section 5.1 of the Joint Action Plan establishes a technical working group, composed of the management of the structures involved. It states that activities are centrally coordinated by a technical working group composed of, among others, the Director-General of DGAF (that is, DG Antifraud in ANAF), the Deputy Directors-General of the central structure of DGAF, and the Director of the Labour Relations Control Directorate of the Labour Inspection. Section 5.2 of the Joint Action Plan specifies that the technical working group shall meet quarterly or whenever necessary at the request of any of its members. 31 Section 5.5 establishes the task of the technical working group to assess the results obtained and consider corrective action. In addition, Section 7.3 of the Joint Action Plan requires that within 60 days of the completion of the joint actions, a report shall be drawn up on the results achieved, conclusions on the achievement of the objectives and proposed measures with a view to improving compliance, both in regulatory and organisational terms. Furthermore, in line with the description of the measure, the Joint Action Plan shall also strengthen the cooperation with labour inspectorates, as well as with other institutions in the field of social and labour protection, to prevent and limit the phenomenon of grey/black work tax evasion. Section 4.2 of the Joint Action Plan states that the territorial labour inspectorates and the regional tax fraud directorates will work together towards the tactical and logistical organisation of joint control actions and their speedy implementation, and Section 5.3 of the Joint Action Plan specifies that experts from other institutions may be invited to attend the meetings of the technical working group. This has a preventive and limiting effect on the phenomenon of grey/black work tax evasion because it strengthens the organisation and strategy of control actions and broadens the scope of institutions involved in the coordination of activities. Commission Preliminary Assessment: Satisfactorily fulfilled Number: 200 Related Measure: Improving the budgetary programming mechanism Name of the Milestone: Entry into force of the government decision for the approval of the methodology for drawing up, monitoring and reporting of the budgetary programmes Qualitative Indicator: Provision in government decision indicating the entry into force of the legislative act for the approval of the methodology for Time: Q2 2022 drawing up, monitoring and reporting of the budgetary programmes Context: Milestone #200 is part of reform C8.R3, which aims at improving the budgetary programming mechanism and modernising the IT system for the development and management of the national budget to enhance its transparency, monitoring and reporting. Milestone #200 requires the entry into force of the government decision for the approval of the methodology for drawing up, monitoring and reporting of the budgetary programmes. Milestone #200 is the first step in the implementation of the reform and it will be followed by milestones #199, #201, #202, #203 and #204, related to: the entry into force of the amended regulatory framework to ensure multi-annual budgetary planning for the significant public investment projects and have an ex-post evaluation of expenditure reviews made by the Fiscal Council; the completion of the spending review in health and education sectors; the adoption of a multi-annual strategy and calendar for a systematic expenditure review across all sectors; the inclusion of the recommendations of spending reviews in health and education in the 2024 draft budgetary law; and the entry into force of the law for tasking the Fiscal Council with a regular impact assessment of spending reviews and the preparation of an implementation report. The reform has a final expected date for implementation on 30 June 2024. Evidence provided: In line with the verification mechanism set out in the Operational Arrangements, the following evidence was provided: 32  i) Cover note justifying how the milestone (including all the constitutive elements) was satisfactorily fulfilled; ii) Copy of the Government Decision 467/2022 approving the Methodology for drawing up and implementing budgetary programmes published in the Official Journal No. 368 on 14 April 2022. The authorities also provided: i) Copy of the Government Decision 427/2022 approving the Methodology for drawing up, monitoring, reporting, and revision of Institutional Strategic Plans published in the Official Journal No. 301 on 29 March 2022; ii) Copy of Law 69/2010 on fiscal and budgetary responsibility, as republished in the Official Journal No. 472 on 4 June 2020; iii) Copy of Law 500/2002 on public finances, published in the Official Journal No. 597 on 13 August 2002; iv) Copy of Law 52/2003 on decisional transparency in public administration, as republished in the Official Journal No. 749 on 29 June 2022; v) Copy of Law 248/2013 on the organization and functioning of the Economic and Social Council, as republished in the Official Journal No. 740 of 2 October 2015; vi) Copy of Law 367/2022 on social dialogue, published in the Official Journal No. 1238 on 2 December 2022. Analysis: The justification and substantiating evidence provided by the Romanian authorities covers all constitutive elements of the milestone. Entry into force of the government decision for the approval of the methodology for drawing up, monitoring and reporting of the budgetary programmes Government Decision No. 467/2022 approving the methodology for drawing up and implementing budgetary programmes (hereinafter referred to as “the Government Decision”) was published in the Official Journal No. 368 on 14 April 2022, and therefore entered into force on the same day, as established by Article 12(3) of Law 24/2000 on the rules of legislative technique for the drafting of legislative acts. The government decision act shall: - ensure drawing up, monitoring and reporting of budgetary programmes (…) The Government Decision ensures the drawing up and monitoring of budgetary programmes, as evidenced by Article 1(2), which states that the methodology shall determine the form of presentation of the budgetary programmes, their content and the method for developing result and/or efficiency indicators, and the way in which the implementation of budgetary programmes is to be monitored. Art. 3(2) requires that Chief Authorising Officers shall draw up the budget programmes in accordance with the provisions of the methodology. Article VI(2) of the Annex to the Government Decision also ensures the reporting of budgetary programmes, specifying that the Chief Authorising Officers are required to draw up and attach to the annual financial statements annual performance reports. 33 (…) - improve performance-based budgetary planning and increase result-orientation (…) By introducing efficiency and result indicators for budgetary planning, and making the monitoring of indicators mandatory as part of the six-monthly and annual reporting (Art. VI(2) of the Annex to the Government Decision), the Government Decision improves performance-based budgetary planning and increases result-orientation. Article I(g) of the Annex to the Government Decision specifies that the draft annual budget laws and budgets shall be prepared by the Government, through the Ministry of Finance, on the basis of programmes drawn up by the Chief Authorising Officers in order to finance actions, to which precise objectives and indicators of results and efficiency are associated; the programmes shall be accompanied by an annual estimate of the performance of each programme. (…) - clearly define objectives, targets, results of actions, the impact of policies (…) Article IV of the Annex to the Government Decision defines the content of budgetary programmes. Specifically, Section B states that:  the objective of the programme defines the target that the public institution plans to achieve as a result of the implementation of the programme. This corresponds to the objectives required by the description of the milestone;The Government Decision provides a single definition including objective and target. Based on this definition, targets are a subset of objectives and are therefore differentiated; Section C states that:  the results of actions/measures are services or products provided by a public institution according to its intended purpose and for which it is fully responsible. These correspond to the results of actions required by the description of the milestone;  the results of public policies describe in a measurable way the changes in economic, competitive, cultural, social, financial-fiscal, administrative-institutional, IT, regulatory, planning and statistical fields, etc. Given that results described in the Government Decision are quantifiable, it is understood that they refer to the impact of policies required by the description of the milestone. Article VI(2) of the Annex to the Government Decision states that the Chief Authorising Officers are required to draw up and attach to the annual financial statements and annual performance reports, elaborated by programme managers, setting out, for each programme, the objectives, expected and achieved results, indicators and associated costs. Expected results of each programme correspond to the targets that the public institution plans to achieve as a result of the implementation of the programme, as required by the description of the milestone. - clearly define (…) indicators allowing both rigorous ex-ante debates on the public policies to be financed and a transparent and reasoned assessment of how the budgeted programmes have achieved public policy objectives and targets. (…) Article IV, Section C, of the Annex to the Government Decision defines efficiency indicators as measurable factors showing the relationship between the results achieved and the resources allocated to achieving them (unit cost of a product, good or service provided by a public institution), characterising the efficiency of the programme and reflecting costs per activity/supported entity/services delivered, etc. 34 Ex-ante debates on the public policies to be financed are established in the context of the institutional strategic plans and the draft annual budget discussions. Being a constitutive element of the budgetary programmes (as established by Article IV of the Annex to the Government Decision), which integrate institutional strategic plans, efficiency indicators allow rigorous ex-ante debates on the public policies to be financed.  Article IV of the Annex to the Government Decision specifies that when drawing up the budgetary programmes and budgetary indicators, account shall be taken of the provisions of Government Decision No. 427/2022 approving the Methodology for drawing up, monitoring, reporting and revising the institutional strategic plans. Article III(2) subparagraph a. of Annex 1 of Government Decision 427/2022 mentions that for the implementation of a strategic objective defined in the institutional strategic plan, it is mandatory to present at least one programme supporting the delivery of results that contribute adequately to determining an impact on beneficiaries. According to Annex 2 of Government Decision 427/2022, the revised institutional strategic plans are sent to the General Secretariat of the Government for comments and methodological proposals. As institutional strategic plans include at least one budgetary programme attached, comments and methodological proposals on the revised institutional strategic plans also encompass budgetary programmes, therefore constituting ex-ante debates on the public policies to be financed. Indicators allow for a transparent and reasoned assessment of how the budgeted programmes have achieved policy objectives and targets. Article IV of the Annex to the Government Decision specifies that the Chief Authorising Officers shall be responsible for drawing up and implementing budgetary programmes relating to the sectors of activities or objectives financed from their own budget, and for assessing the achievement of public policy results and the effectiveness of public spending in the light of its short, medium and long-term effects. In addition, Article VI(2) of the Annex to the Government Decision states that within 25 days from the end of the first semester of the budget year, the Chief Authorising Officers shall send to the Ministry of Finance data on the implementation of the programme indicators and within 90 days from the end of the budget year, the Chief Authorising Officers are required to send to the Secretariat-General of the Government and to the Ministry of Finance data on the implementation of the programme indicators, as well as an overview of the progress of the programmes resulting from their monitoring, which must be structured logically, contain explanations, conclusions and measures to achieve the strategic objectives. (…) This government decision shall be linked to the revision of the budget_NG application. Article IV(D) of the Annex to the Government Decision specifies that the budgetary programmes shall be entered in the budgetary application ‘BUGET_NG’ for the preparation of the State budget and the State social security budget, their annexes and the budgets of the chief authorising officers and their annexes. The Government Decision therefore contributes to the revision of the application. Commission Preliminary Assessment: Satisfactorily fulfilled Number: 213 Related Measure: Reform of the public pension system Name of the Milestone: Entry into force of the amendments to the regulatory framework to ensure the sustainability of Pillar 2 pensions Qualitative Indicator: Provision in the regulatory framework indicating the Time: Q1 2022 entry into force of the legislation Context: Milestone #213 is part of reform C8.R6, which should reform the entire public pension system to 35 ensure sustainability and adequacy of public pensions. The reform involves the adoption of a new law on the public pension system, with the input of technical assistance, which is going to replace the Law No. 127/2019. Milestone #213 requires the entry into force of the amendments to the regulatory framework to ensure the sustainability of Pillar 2 pensions. Milestone #213 is the third milestone of the reform, and it follows the completion of milestone #211 related to contracting technical assistance to prepare analysis and proposals for a reform of the pensions system and milestone #212 related to setting up a monitoring committee in charge of reviewing the policy interventions in the pension system. Milestone #213 will be followed by milestone #214 related to the entry into force of the new law on the pension system replacing the provisions of Law No. 127/2019 and milestone #215 on the entry into force of the legislative framework for reducing expenditure on special pensions. The reform has a final expected date for implementation on 30 March 2023. Evidence provided: In line with the verification mechanism set out in the Operational Arrangements, the following evidence was provided: i) Cover note justifying how the milestone (including all the constitutive elements) was satisfactorily fulfilled; ii) Copy of Law No. 104/2023 of 13 April 2023, approving Government Emergency Order No. 174/2022 amending certain legislative acts in the field of private pensions, published in the Official Journal No. 319 on 13 April 2023; iii) Copy of Law No. 238/2022 of 21 July 2022, approving Government Emergency Ordinance No. 23/2022 supplementing Article 43 of Law No. 411/2004 on privately managed pension funds, published on the Official Journal No. 735 on 21 July 2022 iv) Copy of Government Emergency Ordinance No. 23/2022 of 16 March 2022, supplementing Article 43 of Law No. 411/2004 on privately managed pension funds, published in the Official Journal No. 259 on 16 March 2022; v) Copy of Law No. 411/2004 of 18 October 2004, on privately managed pension funds, as republished in the Official Journal No. 482 on 18 July 2007; vi) Explanatory note developed by the Financial Supervisory Authority titled “Analysis of how