Romanian Prime Minister reveals financial plan featuring increases in Value-Added Tax and fuel taxes aimed at narrowing the budget shortfall
Romania has announced significant tax hikes and spending reforms, effective from August 1, 2025, in a bid to curb the growing budget deficit and avoid a potential financial crisis. The fiscal package, aimed at restoring investor confidence and meeting European Union fiscal targets, includes a series of measures that will impact various sectors of the economy.
Key elements of the reform include changes to Value-Added Tax (VAT) rates, increased excise duties, a bank profit tax, and health insurance contributions.
**VAT Rate Changes**
The standard VAT rate has risen from 19% to 21%, while the two reduced VAT rates of 5% and 9% have been unified at 11%. This change affects essential goods and services such as food, medicine, water, books, firewood, district heating, and the hospitality sector. The VAT rate for hotels and restaurants may increase further to 21% after an evaluation in October 2025.
**Excise Duty Increases**
Excise duties on fuel, alcohol, and tobacco have been increased. To mitigate the impact on the transport sector, a partial refund scheme for fuel used by freight and logistics companies has been introduced.
**Bank Profit Tax**
The government has doubled the tax on bank profits, marking one of the largest tax hikes in a decade to improve fiscal stability.
**Health Contribution (CASS)**
A health insurance contribution will be applied to pensions exceeding RON 3,000, affecting only the amount above this threshold.
The government also plans to review and increase other tax rates, including taxes on capital gains. Budget expenditure cuts and wage/pension freezes have been implemented to maintain fiscal discipline through 2025 and 2026.
In education, teaching hours in schools and universities will increase by two hours weekly without a corresponding salary raise, and the scholarship system will be restructured. Merit scholarships will become limited, while social grants will be targeted toward disadvantaged students.
The fiscal reform in 2026 will include wage and pension freezes in the public sector, a property tax overhaul based on market values, and further institutional reorganization.
Prime Minister Bolojan warned that without intervention, Romania risks defaulting on its financial obligations and faces consequences similar to Greece's 2009 crisis. Romania recorded a 9.3% budget deficit in 2024 - the highest in the EU, prompting the ECOFIN council to issue a warning and demand immediate corrective measures.
The tax hikes and spending reforms are expected to increase the cost of living for consumers but are intended to stabilize public finances and prevent a deeper financial crisis. The prime minister stated that the VAT hike may slightly increase inflation but stressed that such measures are the only ones still trusted by financial markets.
[1] "Romania to Raise VAT Rate to 21% in August - Finance Minister", Reuters, 1st July 2025. [2] "Romania to Double Bank Profit Tax", Bloomberg, 5th July 2025. [3] "Romania to Unify Reduced VAT Rates at 11%", Agerpres, 10th July 2025. [4] "Romania to Introduce Health Insurance Contribution for Pensions Over RON 3,000", Ziarul Financiar, 15th July 2025. [5] "Romania's Fiscal Package: An Overview", European Commission, 22nd July 2025.
- The fiscal package in Romania, aimed at addressing a growing budget deficit, will impact the industry sector as a bank profit tax has been implemented, doubling the tax on bank profits.
- In the education and self-development sector, changes include an increase in teaching hours in schools and universities without a corresponding salary raise, and a restructuring of the scholarship system.
- The tax hikes and spending reforms, announced by Romania, are also affecting the general news and politics, as these measures are intended to stabilize public finances and prevent a deeper financial crisis, similar to Greece's 2009 crisis.
