Kulcsár, Edina

Morar, Ioan-Dan

Sabau,-Popa, Claudia Diana

University of Debrecen Electronic Archive

 402 
THE EVOLUTION OF FISCAL INDICATORS IN THE LAST YEARS IN 
ROMANIA 
Morar Ioan – Dan 
University of Oradea, Faculty of Economics 
Sabau-Popa Claudia Diana 
University of Oradea, Faculty of Economics 
Kulcsar Edina 
University of Oradea, Faculty of Economics 
 
Tax revenues are an important part of budget revenues, and their structure represent the mirror 
of  government's fiscal policy. Also their level and structure reflects the evolution of the economy 
in general. The evolution of tax revenues has been influenced by the financial crisis of this 
period. The tax revenue structure in Romania is characterized by relatively high share of indirect 
taxes revenues in comparison with another European Union states, where the share of revenues 
from direct, indirect taxes and social contribution is relatively close.  
Government expenditure is vital for the economy especially if they are focused on productive 
areas. They are the engine of economic developments and plays an important role in raising the 
standard of living of population in a state. In the last years, the growth rate of public expenditure 
was higher than the trend of tax revenues increase. Sizing revenue and public expenditure is 
essential for achieving the budget balance target and to meet the criterion stipulated in the 
Stability and Growth Pact. According to the Pact, the budget deficit may not exceed 3% of GDP. 
This development asymmetric led to increased deficits in the last years. 
The high level of structural deficit has canceled an initiative to tax relaxation in this recession 
period. The need for fiscal consolidation has been paramount in the context of chronic deficit and 
difficulties faced in financing it. The opportune solution to finance the high public deficit and to 
achieve the objective of financial stability of the economy was contracting of public debt from 
International Monetary Fund. Other measures to reduce the deficit were the reduction of public 
expenditure and increasing tax revenues. 
We propose in this paper to analyze the evolution of fiscal indicators in comparison with the 
evolution of macroeconomic indicators to capture the reaction of taxpayers and economic 
environment at measures adopted. 
 
Keywords: fiscal, tax, fiscal revenues, budget, financial crisis 
 
Coduri JEL: E60 
 
I. Introduction 
The importance of fiscal policy of a state budget is derived from the impact that it manifests on 
the main macroeconomic indicators which reflect progress through economic growth. The fiscal 
–budgetary policy must be linked to macroeconomic policies and support macroeconomic 
stability objective.  The main objectives of  fiscal-budgetary policy are to stimulate the economic 
activity, rising living standards, fiscal consolidation, promotion of countercyclical fiscal policies. 
The mirror of fiscal-budgetary policy is a state budget, which includes destinations of financial 
resources and their sources of funding. Some authors considers that budgetary policy represent 
the concept and actions of government for public revenue and expenditure, the means to raise 
revenue, the types and size of expenditure which can interfere in the stabilization and economic 
recovery( Dobrotă N 1999:354). Although the architecture of revenue and expenditure depends  
 403 
from economic priorities of a state, it must adapt to situations at a time. Through the budgetary 
policy is reflected the efficiency  of public expenditure use and management and the allocation of 
financial resources. The  level and structure of public revenue and expenditure reflects the main 
trends, directions for action in a state economy. So do not neglect “the important role of policies 
and budgetary levers in the modern economy”, like it is highlighted by Constantin Tulai  
professor(Tulai C. 2007:68). Fiscal policy offers the main tools which is used by the government 
to influence the economy trough changes in taxation level or public expenditure adjustment. 
Fiscal policy plays an important role in mitigating the economic cycle. According to several 
experts which we subscribe too, the effectiveness of fiscal policy is reflected by its role of 
stabilizing the economy. Thus, we can say that the optimal tax policy is acting to mitigate the 
amplitude of business cycle fluctuations, that in periods of recession adopt a lax behavior and in 
the expansion periods a more restrictive behavior. An important indicator by means of we can 
estimate if the fiscal policy performs the stabilizing role is the structural deficit. The structural 
deficit shows how many from the fiscal-budgetary position level reflected through taxes, 
transfers, expenditure due to economic conditions and how many due to fiscal policy decisions 
taken. The analysis of this indicator reflects the sustainability of fiscal policy.( Raport anual: 
Evoluţii şi perspective macroeconomice şi bugetare 2011: 23-24)  
By the side of monetary policy, fiscal policy has an important role in the general economic policy 
objectives. While monetary policy acts on short-term, the effects of fiscal-budgetary policy is 
outlined in a medium or long time horizon. However the objectives of the two categories of 
economic policies must be linked. 
In the context of Romania integration into the European Union, another concern is adapting the 
fiscal-budgetary policies to EU requirements. Optimum sizing of public revenue and expenditure 
is essential to achieve budget balance and to respect the objective criteria laid down in the 
Maastricht Treaty. According to the Treaty, the budget deficit must not exceed 3% of GDP. 
The current financial crisis has exposed some weakness of fiscal budgetary policy direction of 
Romania that pro-cyclicality. Thus, in the context of excessive growth in the budget deficit in 
Romania is necessary a budgetary and fiscal consolidation. A growth model based on debt and 
increase investment in housing and consumer sector, high budget deficits have required fiscal 
consolidation efforts. 
 
II. The evolution of main fiscal indicators in period 2000-2010 
Procyclical nature of fiscal and budgetary policies of economic growth before the financial crisis, 
canceled fiscal space to stimulate the economy during the recession claiming the need to reduce 
high budget deficit during the crisis and maintaining pro-cyclical fiscal and budgetary policies. 
Although Romania is the country with the highest GDP growth in Europe but in the short term 
this situation marks a number of uncertainties about the outcome of the deep financial 
crisis(Raport privind situaţia macroeconomică pentru anul 2009 şi proiecţia acesteia pe anii 2010-
2012: 8). 
Analyzing the revenue and expenditure in the period 2000-2010, we notice a trend of growth, but 
it is noticeable that since 2006 public expenditure growth has outmatched the strong growth trend 
of public revenues. The share of public revenues in GDP in the period 2008-2010 is situated 
between 32.2% and 32.7%, while the share of expenditure in GDP have been growing larger, 
ranging between 37-39, 5%( Ministry of Finance - Raportul la proiectul Legii bugetului de stat pentru 
anul 2011 şi orizontul 2012-2012:9). 
This development resulted in an exaggerate increase in the budget deficit. Unlike other European 
Union countries (Ireland, Belgium), where the excessive budget deficits growth is due by 
measures adopted by national governments to support the banking system, in Romania the 
budgetary deficit is determined by two main factors: the dramatic loss of budget revenues caused 
by the GDP collapse and the structural deficit accumulated by Romanian before the starting of 
financial crisis. If in the period 2001
the Maastricht Treaty, since 2008 the share of budget deficit to GDP
about 5.7% from GDP, exceeding far the
measures aimed primarily efforts to increase tax revenue by increasing the VAT rate 
the expenditure side, efforts were directed towards a reduction in salaries of public sector, 
complemented by reducing the number of employees, a decrease of 15% of most social benefits 
and reduce spending on goods and services by 10%.
Graphic 1. Evolution of revenue,
 Source
 
 
By the side of public revenues, Romania is the state with the lowest share of budgetary revenues 
in GDP (32.4% of GDP in 2009), in comparison with other European Union countries, with about 
11% lower than the EU average. Also the share of tax revenue to GDP is below the EU average.
Analyzing chart below we notice a downward trend in the share of fiscal revenues in total 
government revenue, emphasizing in the period 2009
economic slowdown and GDP downward during 2008
revenues in total revenues during 2009
revenue in the total income. 
  
-40000.0
-20000.0
0.0
20000.0
40000.0
60000.0
80000.0
100000.0
120000.0
M
ill
io
n
 
Le
i
REVENUES 
 
404 
-2007, the budget deficit was fitted within the limits set by 
 has significantly increase 
 permitted threshold of 3 % of GDP. Fiscal adjustment 
 
 
 
 public expenditure and budgetary deficit 2000
: Ministry of Finance- www.mfinante.ro 
-2010. This evolution is certain
-2009 period. Reducing the share of tax 
-2010 budget is offset by an increase of share 
 
 
 
 
 
- total TAX REVENUES
with 5%. On 
-2010 
 
 
ly due to the 
 of non-tax 
Graphic 2. Trend in share tax revenue of total income during 2000
Source
The tax revenue structure in Romania is characterized by relatively high share of indirect taxes 
revenues in comparison with another European Union states, where the share of revenues from 
direct, indirect taxes and social contribution is relatively close.
fluctuate between 20% and 30% of fiscal revenue in the
with the share of tax revenues from indirect taxes ranging between 65% and 80%.
strictly period 2007-2009, we can observ that the
downward trend from 67.5% in 2007 to 65.1% in 2009.
taxes change in 2010, when an increase of almost 10 percent 
This development is due to austerity measures adopted by the Romanian government among 
indirect taxes in response to IMF condition
gradually increasing excise. 
 
Graphic 3. The share of direct tax and indirect tax revenue to the formation of tax revenues 
Source: Ministry of Finance
 
70% 80
2000
2002
2004
2006
2008
2010
%
To
ta
l R
ev
en
u
es
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
%
T
o
t
a
l 
R
e
v
e
n
u
e
s
Direct taxes(%)
 
405 
 
-2010
 
: Ministry of Finance- www.mfinante.ro 
 
 Although the share of direct taxes 
 reviwed period, it is lower in comparison 
 revenue from indirect taxes knows slightly 
 The orientation of revenue from indirect 
record compared with 2009.
s, namely increase in VAT rate from 19% to 24%,
2000-2010 
 
- www.mfinante.ro 
% 90% 100%
Tax revenues (%) 
Total revenues
Social Contributions 
(%)Total revenues
Non-tax revenues 
(%) Total revenues
Capital revenue (%) 
Total revenues
% 50% 100%
27.5
30.0
24.9
21.3
25.1
26.0
30.4
32.5
33.1
34.1
25.7
72.5
70.0
75.1
78.7
74.9
74.0
69.6
67.5
66.1
65.1
74.3
Indirect taxes(%)
 
 Analyzing 
 
 
 406 
Analyzing the main categories of sources of revenue: income tax, VAT, excise duties and social 
contributions can be seen that the largest share is held by value added tax, culminating in 2006 
recorded values (8.05% of GDP), 2007 (7.5% of GDP) and 2008 (7.9% of GDP). There then 
follows a collapse in 2008-2009 of VAT receipts. Then follows a collapse in 2008-2009 of VAT 
receipts. Since 2010, the revenues from VAT  has resumed the ascendant trend as a result to 
measures taken by the government: the increase in VAT from 19% to 24% by OUG 58/2010 to 
achieve a balance between revenues and expenditures, where the income were strongly affected 
by the financial crisis. Government has taken this measure to increase the VAT rate to achieve 
the objectives of fiscal policy commitments agreed in the bilateral funding agreements concluded 
with the International Monetary Fund, the World Bank and European Commission. In 
comparison with the revenues from value added tax, excise revenues are not aware such 
asymmetric developments in the analyzed period. A slight decrease in revenue from excise duty 
in 2008 with slight recovery observed in 2009. The slight increase in excise revenue due to the 
increase of excise duty applied on 1 January 2010 for cigarettes, electricity, heat and gas, to 
achieve the minimum level required by Community legislation, the increase of the average rate 
RON / EURO considered at the computation of excise for 2010 and increase the amount of duty 
on some products. In order to study the impact of fiscal changes on the macroeconomic indicators 
we can say that measures to increase the rate of VAT and excise duty levels had a negative direct 
effect of inflation growth in Romania. As regards direct taxes there are high differences among 
the income taxes, a decrease of approximately 3% of GDP in 2009 compared with 2008. Since 
may 2008, receipts from corporate income tax recorded a slight decrease. Decreasing receipt 
from direct taxes is determined mainly by decline of household income and the level of profits as 
a result of financial crisis. Measures taken by the Romanian government in order to income tax to 
restore the balance between revenues and public spending was temporary introduction of the 
minimum tax in April 2009. From the analysis of changes in tax receipts we can observe that the 
measure do not provided higher receipts from this source, the effect was rather gap mitigation. 
Social benefits also know a slightly downward trend. The share of social contributions to GDP is 
steadily falling since 2006. This development is the result of gradually implementation of pension 
pillar II, which involves targeting gradual shares of social security contribution rate by a private 
pension fund to invest. Gradually implementation of the pension pillar II is achieved by 
increasing the share of social contributions redirected from 2.5% to 3% in 2010. In order to 
restore balance in the public pension system have been adopted reforming measures which 
include: raising the standard retirement age, increasing the number of those taxpayers with 
income from professional services, managers, discouraging the number of early retirement, early 
partial and unfair disability retirement, the expansion base for social contributions. 
 Overall we conclude that the financial crisis effects have been evident since the end of 2008, 
resulted in a strong decline are the main sources of financing state budget. 
 
 
  
Graphic 4. Evolution of the main sources of financing state budget 2000
Source
In terms of economic contraction and the budget deficit financing needs in 2008 (5.7% of GDP), 
Romania's public debt increased. The optimal solution for financing,the high deficit and debt 
refinancing, respectively to achieve the objective of financial stability
contracting of public debt from the International Monetary Fund( Mara Eugenia Ramona, Inceu 
Adrian, Cuceu Ionuţ, Achim Monica Violeta 2005: 5). Increasing public debt growth is due 
mainly  by the increasing of government debt, local deb
government debt shows that public debt contracted directly by the state is about 90% of the total 
public debt and debt guaranteed by the state government is about 10% of the total.
situaţia macroeconomică pentru anul 2009 
the public debt by the currencies in 2010, we can observe 
Euro (44.1%), followed by national 
total debt government. High share
domestic and foreign. Romania's public
reaching the 2010 level of 30.8% 
Maastricht Treaty of 60% of GDP. 
Graphic 5. Evolution of public debt and budget deficit 2001
0
1
2
3
4
5
6
7
8
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
%
G
D
P
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
2001 2002
%
G
D
P
 
407 
 
 
-2010
: Ministry of Finance- www.mfinante.ro 
 of the economy was 
t remained constant. The structure of 
şi proiecţia acesteia pe anii 2010-2012: 30). Analyzing 
the most important component is the 
currency (43.5%), while other currencies have only 12.4% o
 of debt in euros due to the hiring of loans in euro
 debt has increased significantly in the last
of GDP, which is well below the ceiling imposed
-2010 
 
Source: Eurostat 
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
Corporate tax/GDP
Income Tax/GDP
VAT/GDP
Excise/GDP
Social Cotribution/GDP
2003 2004 2005 2006 2007 2008 2009 2010
Budget deficit Public debt
 
 
( privind 
f 
, both 
 two years, 
 by the 
 408 
III. Conclusions 
Through the financing agreements concluded with the IMF and the European Commission, the 
Romanian government has asumed an adjustment program to reduce the general government 
deficit at 4.4% of GDP for 2011 of 3% in 2012, and most adjustment measures are already in 
force. This further implies keeping under control public spending and the elimination of 
discretionary fiscal policy measures affecting the revenues. 
In conclusion we can say that Romania's fiscal policy should remain a conservative, restrictive 
towards the goal of fiscal consolidation. 
 
References: 
1. Consiliul Fiscal, “Raport anual: Evoluţii şi perspective macroeconomice şi bugetare”, martie 
2011 
2. Dobrotă N., “Dicţionar de Economie”, Editura Economică, Bucureşti, 1999, p. 3541 
3. Mara Eugenia Ramona, Inceu Adrian, Cuceu Ionuţ, Achim Monica Violeta, “The impact of 
economic crisis on the fiscal revenues”, The Journal of the Faculty of Economics - Economic-
Volum 3, Oradea, 2009 
4. Ministerul de Finanţe, “Raportul la proiectul Legii bugetului de stat pentru anul 2011 şi 
orizontul 2012-2014” 
5.“Raport privind situaţia macroeconomică pentru anul 2009 şi proiecţia acesteia pe anii 2010-
2012” 
6.Tulai, C., „Finanţe”, Editura Casa Cărţii de Ştiinţă, Cluj-Napoca, 2007 
 
  


The evolution of fiscal indicators in the last years in Romania

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The evolution of fiscal indicators in the last years in Romania

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