A cut in CAS (social securitycontributions) is being considered in the government's letter ofintent to the IMF, but will be conditional on the performance ofbudget revenues, says Mihai Tănăsescu, Romania's representative tothe IMF.
"Budget revenues are looking goodand Romania has the necessary fiscal space to reduce the socialcontributions this year. But the problem is what will happen in2012, when not only will the budget deficit have to be cut to 3% ofGDP, but it will have to be calculated based on the European ESA 95methodology, and will include debts of state-held companies whosefinancial statements had not been centralized by the end of theFund mission's visit, and which could producesurprises."
Such being the case, Tănăsescusays a careful analysis is necessary prior to making a decision,with social contributions being a very important segment of budgetrevenues. "It would be a grave error to decide a reduction ofsocial contributions hastily, and have to take additional fiscalaction in 2012 to make sure Romania meets its deficit target,despite the impact of consolidating the financial statements ofstate-held companies." He adds that in this respect, the governmentacted hastily when it announced as early as in the first fourmonths of the year the prospect of cutting the social contributionsin the second half of 2011.
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