Preliminary assessment of the third payment request of Romania (2024)

Commission services on 18 June 2024.

Furthermore, in line with the description of the measure, the comprehensive review of the tax system in the plan shall identify distortions and areas where relevant tax legislation should be adjusted (…) Section 3.5.2 of the World Bank report identifies distortions to business form in the Romanian tax system. Section 4 (pages 79-80) provides recommendations, including tax legislation changes, to address these distortions.

In line with the description of the measure, the review of the tax framework shall also aim at expanding green taxation, including as flanking measure for the sustainable transport and energy components. In that respect, Sections 3.6 and 4 of the World Bank report present an analysis and recommendations on expanding green taxation, including an increase in carbon pricing via increasing excise tax rates on fossil fuels, as well as gradual elimination fossil fuel subsidies, and the use of revenues generated from the fossil fuel subsidy reform and additional carbon pricing to compensate vulnerable groups. These are flanking measures for the sustainable transport (Component 4) and energy (Component 6) components of the Council Implementing Decision.

Finally, in line with the description of the measure, in carrying out this reform, Romanian tax legislation shall be subject to a thorough analysis (…) Section 3 of the World Bank report presents analyses of the Romanian tax legislation. Specifically, section 3.1 presents the current tax rules on labour income; section 3.2.1 presents the current tax rules on capital income; section 3.3.1 presents the current tax rules on immovable property; section 3.5.1 presents the microenterprise tax regime; section 3.6.2 presents an overview of the energy tax regime in Romania, while sections 3.6.3 and 3.6.4 present a comparative analysis of fossil fuel taxation and subsidies, as well as options for reform in Romania; and section 3.7.2 presents the current VAT regime. Section 4 then outlines option for tax reform that could support the RRP implementation. Commission Preliminary Assessment: Satisfactorily fulfilled