Fiscal structural reforms Bucharest, June 2016

Fiscal Structural Reforms Overview Main fiscal developments Fiscal Structural Reforms Further reform priorities Expenditure efficiency Tax administration Bucharest, June 2016 Strengthen fiscal institutions State owned enterprises

Strong fiscal consolidation but pressures are rising Total spending dropped by about 6 percentage points of GDP from 2009 to 2014 Measures adopted previous year have increased the deficit close to the 3 percent SGP limit Critical to preserve sufficient budgetary resources

Fiscal structural reforms will be key…. Main fiscal developments Further reform priorities Expenditure efficiency Tax administration Strengthen the fiscal institutions State owned enterprises

Efficiency of public spending should increase significantly Efficiency of capital spending in the EU 28

Improving tax administration

Strengthen the credibility of fiscal institutions Romania’ fiscal rules fare well in comparison with the rest of the EU But the actual enforcement of the rules is weak The effectiveness of the rules should be strengthened

Addressing remaining structural issues – SOE sector Romanian SOEs still have low profitability and many operate at loss creating large arrears A drain on public finances in the form of foregone tax revenues, dividends and, to a lesser extent, subsidies New legislation on corporate governance – a major step forward Reforms to improve the professionalism of SOEs’ management and resource allocation

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