The state is the most generous employer in Romania, and the salaries it pays are the highest of the entire economy, the most recent survey conducted by the National Statistics Institute reveals.
The survey shows that the state is number one in the monthly salary ranking by ownership type: the employees of the companies where the state owns the controlling interests get about 435 euros in gross amount (1,543 RON) per month, more than those working for privately-controlled companies, who make about 300 euros (1,047 RON) in gross amount.
Next in the ranking are the companies that are entirely held by foreign shareholders (297 euros or 1,044 RON in gross amount), by the state (269 euros or 946 RON in gross amount) and the companies entirely held by private investors (213 euros or 750 RON).
Experts, however, say that these figures do not reflect the reality in the economy, because employees in the state-owned sector have their entire pay recorded in their employment record book, while private companies are trying most of the time to pay the salaries using other means to avoid the contributions they owe to the state budget.
"It is absurd to believe the state pays the highest salaries, it is exactly the other way around. The private sector of the economy is known to have a greater appetite for alternative ways to pay for dependent work," says Gabriel Biris, tax lawyer and partner with Biris Goran law firm.
Biris says the very high percentage of social security contributions and the fact that the base for computing them is uncapped in most cases make it more convenient for companies and employees not to declare their salaries and disguise them under other forms of remuneration, such as service contracts.
"Microenterprises would be used for this purpose until 2007, but now, with the provisions that limit the use of microenterprises for consultancy and management, we are dealing with registered sole traders more and more often," says Biris. He adds that out of the approximately 200,000 microenterprises with a sole employee, at least 50,000 are used to pay high salaries, without, however, paying the contributions owed to the state.
"I believe it is a big fiscal strategy mistake not to address the cause of the problem and always try to prevent its effects. Recent history has shown that every time taxes were cut, the budget revenues increased," Biris says.
He believes that if the base for computing the contributions due to the state were capped at a reasonable level and legislative measures were implemented to make it harder to pay salaries by alternative methods, the results would be much better. "Both in terms of budget revenues and in terms of attracting investments in the real economy," he adds.
Although the state pays the highest salaries only in statistics, and not in the real economy, the government was one of the salary growth drivers last year. Public administration employees got the highest raises, 38% in euros in 2006, while education and health care employees got 26% and 23% raises last year.
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