Social security contributions (CAS) will be cut by six percent over three stages next year, with the most important move in December, according to the 2008 draft budget.
Employers will stand to benefit the most from the CAS cut next year, with their share of contributions falling by 4.5%, compared with 1.5% applied to contributions paid by employees.
Health care contributions will witness the largest cut -1.8%, followed by unemployment contributions - 1.5%, pension contributions - 1.5% and work-related accidents - 0.7%. Information concerning the CAS reduction schedule is included in the 2008 draft budget, which the Ministry of Economy and Finance sent to ZF. The 2008 draft budget will be endorsed in a government meeting today, and then sent to the Parliament for debate, in the last day allowed under law (October 10).
According to this schedule, the Government has left the most important CAS reduction stage until December, when the CAS for pensions, unemployment and health care are set to go down.
The enforcement of this final reduction stage in 2008 leaves room for doubt, considering the parliamentary elections and implicitly the creation of a new Government could occur before December 2008. The explanation for the postponement of the pension CAS cut for December can be found in the pressures the social security budget will be subjected to next year.
First of all, the 43% pension increase enforced on January 1, which is a significant increase in the expenses of the budget. Then the revenues of this budget will go down, most likely by March-April, because this is when two percent of these contributions will start being transferred to the private pension funds for at least 3 million employees.
Overall, the budget revenues will increase by 21% and expenses by 20% next year, according to the draft budget that will be approved in a Government meeting today. In addition today, the budget will be put forward before Parliament for debate.
The highest revenues will come from the social security contributions and value added tax (VAT). The highest increases in revenues collected will be registered by social security contributions and income and salary tax (29% and 28% in RON). Revenues from profit tax will go up by 12%, while VAT and excise collection increase less, by 16% and 8%. At the same time, the budget relies on a substantial increase in non-fiscal revenues (royalties, environmental taxes etc.), as well as donations (which include non-repayable EU funds).
As far as expenses are concerned, the largest part of the budget (27% of the total expenses) will go to social assistance. This chapter will witness one of the highest increases compared with 2007 next year, 31% in RON, compared with a 20% increase of the total expenses. In turn, investments and transfers will both increase by 34%.
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