Romanian government plans tax hikes to boost budget

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BUCHAREST, July 5 (Reuters) - Romania's coalition government plans a series of tax rises from next year, including increasing dividend and property taxes, which are expected to boost budget revenue by 13.4 billion lei ($2.82 billion), a draft bill showed on Tuesday.

Some of the changes, including higher excise duties on cigarettes and alcohol, will apply from August of this year and generate 2.2 billion lei in revenues by year-end, according to the draft bill released by the finance ministry.

The country collects budget revenue worth around 30% of gross domestic product, significantly below the EU average of roughly 46% of GDP, and spends most of it on public sector wages, pensions and subsidies.

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The European Commission, Romania's central bank and ratings agencies have warned this year that the fiscal deficit and low revenue collection were a main risk to the economy.

In June, the International Monetary Fund said Romania will likely overshoot its budget deficit target for this year, with the economy facing the knock-on effects of the war in Ukraine and surging inflation, and needs tax measures to boost revenues.

The proposed changes, which will likely be approved this month, include raising dividend tax to 8% from 5%, boosting value added tax for drinks with high-sugar content to 19% from 9% and higher levies on gambling income.

The hospitality industry will pay value added tax of 9% from the current 5% and tax deductions will be capped for agriculture, construction and the food industry. Deductions for low income people and changes in taxation for small businesses are also included.

The draft bill does not include changes to the flat income tax, which the leftist Social Democrats, parliament's largest party, want to replace with progressive taxation which their Liberal Party coalition partners oppose. read more

($1 = 4.7504 lei)

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Reporting by Luiza Ilie; editing by David Evans

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