The Romanian government has recently introduced the “Trenuleț” Ordinance, a legislative measure that brings significant changes to the tax regime applicable to certain strategic sectors of the economy. Among the most controversial provisions of the ordinance is the elimination of tax incentives for employees in IT, construction, agriculture, and the food sector. This decision has sparked a wave of reactions from the business environment, trade unions, and economists. Let’s analyze in detail the implications of this major change.

What does the ordinance provide?

The government has decided to eliminate the 10% income tax exemption for gross salaries up to 10,000 RON, and the contribution to the second pension pillar (Pillar II) for employees in IT, construction, agriculture, and the food industry will once again become mandatory. Although the tax exemption was initially planned to remain in effect until 2028, the government has decided to remove it earlier, starting in 2025, thereby accelerating the process of tax uniformity. This measure marks a significant shift in Romania’s fiscal policy, aiming to increase budget revenues and reduce economic distortions.

What taxes must be paid after the elimination of tax incentives?

The elimination of tax incentives means that mandatory contributions will now apply to gross salaries. Employees in the mentioned sectors will be required to pay the same taxes as all other employees, specifically: 10% income tax, 25% pension contribution (CAS), 10% health contribution (CASS).

An important aspect is that, while in previous years the contribution to the second pension pillar (Pillar II) was voluntary, it is now becoming mandatory, representing 4.75% of the 25% allocated to CAS.

Why were the tax incentives removed?

The government argues that tax incentives have resulted in substantial losses to the state budget, with estimates indicating figures in the billions of RON annually. In the long term, these incentives were considered unsustainable and contributed to inequalities in the labor market.

Additionally, the authorities have expressed their intention to align Romania’s tax system with European practices, where such tax exemptions are less common. The European Union has repeatedly suggested that selective tax relief policies can create economic distortions.

Impact on the IT sector

The IT sector is one of the main drivers of the Romanian economy, significantly contributing to GDP and attracting substantial foreign investments. The elimination of the income tax exemption for IT employees could have the following consequences:

• A decline in the attractiveness of the IT industry for both local and international talent;

• Increased costs for employers, who may need to raise gross salaries to compensate for the loss of benefits;

• Talent migration to other countries offering more favorable tax conditions.

Construction and agriculture: vulnerable sectors

The construction sector is already facing a labor shortage, and the elimination of reduced social contributions could worsen the situation. Employers will experience increased costs, which could lead to:

• A slowdown in infrastructure development,

• Higher housing prices and increased costs for other real estate projects.

In agriculture, this measure risks affecting the competitiveness of Romanian farmers, who are already dealing with challenges such as high input costs and climate change.

Food processing: an unexpected blow

Food processing is a strategic sector with a crucial role in food security. The removal of tax incentives could result in:

• Higher food prices, affecting consumers,

• A reduction in investments in modern technologies, essential for improving competitiveness.

Reactions from the business community

The removal of tax incentives has been criticized by employers’ associations and trade unions, with some companies warning that they may be forced to cut investments or even withdraw from Romania.

Long-term perspectives

Although the government’s intention is to increase state budget revenues, the risks associated with this measure are significant. An alternative solution could have been the implementation of a gradual plan, allowing companies and employees to adapt to the new tax conditions over time.

Conclusion

The elimination of tax incentives for employees in IT, construction, agriculture, and the food sector represents a paradigm shift for the Romanian economy. While the declared objective is to improve fiscal sustainability, the secondary effects could be profoundly negative, particularly in already vulnerable sectors. It remains to be seen whether the government will manage the transition in a way that minimizes social and economic impact.