The Bolojan government responds to criticism regarding the increase in taxes on housing and cars. Three reasons why he says “property tax reform was necessary”

The government comes with explanations, on Sunday, after more than a week in which both taxpayers and part of the local authorities expressed their dissatisfaction with the increase in local taxes imposed by Prime Minister Ilie Bolojan. The executive says that the increase in taxes on buildings, land and vehicles will lead, on average, to increases of 70–80% for citizens and to additional revenues estimated at 3.7 billion lei in 2026.

The government states that the reform was inevitable, citing three reasons why it was necessary. According to the cited source, Romania had one of the lowest shares of property tax revenues in the European Union, at 0.55% of GDP, compared to an EU average of 1.85%.

In addition, more than a third of the taxes were not collected, and the calculation values ​​no longer reflected the economic reality, the Executive also says.

“There were major disproportions in taxes from one locality to another. The value of the taxes did not take into account the market value of the building in the case of individuals. The rate of collection was low and the taxes were not updated with the inflation rate”, this being the third reason, according to the Government representatives.

Also, the Executive also claims that the old offices led to “an increase in the amounts transferred from the national budget to the local authorities. We could no longer continue like this”.

“The lack of reform would have led to the loss of European funds”

According to the quoted source, the lack of reform would have endangered European funds, including payment requests 4 and 5 of the PNRR, estimated between 300 and 500 million euros, and would have deepened budget imbalances at the local level.

The government stated that the property tax reform was undertaken in the period 2021-2022 through the National Recovery and Resilience Plan (PNRR) to reduce the budget deficit, but “several government teams” delayed the implementation.

“It is also foreseen in the commitment assumed by the Government of Romania in December 2024, approved in January 2025 by the European Commission”, said the Government, referring to the period when Marcel Ciolacu was prime minister.

The measures that were decided by the Government entered into force late, as a result of the decisions of the Constitutional Court in December, the attacks formulated by the opposition and the subsequent legal procedures, the Government also states, things that delayed the submission of payment request number 4, as well as the collection of European funds.

“Local councils can increase local taxes and levies by up to 100%”

The executive led by Ilie Bolojan explained that the most important change concerns the tax base of buildings and land, which has been updated by approximately 70%, up to a reference value of 2,677 lei/sqm (approximately 535 euros/sqm).

The government specifies that this stage is a transitory one, following that, from January 1, 2027, taxation will be based on the market value of properties, including for natural persons.

At the same time, the reductions applied until now depending on the age of the building or its type have been eliminated, which explains why, in some cases, the tax can rise above the average of 70%.

The government also says that local authorities retain the power to set tax rates, but not lower than those in 2025, and local councils can increase local taxes and fees by as much as 100%, up from the previous limit of 50%.

“It must be emphasized that the money collected from local taxes and fees remains in the local budgets, the state budget no longer being able to ensure the increasing transfers as a result of the budget deficit”, the Government sent.

What will be the budgetary impact?

The application of the new rules will bring, according to the estimates submitted by the Government, an increase in income from property taxes by more than 30% compared to last year, as follows:

• +1.42 billion lei from taxes on buildings,
• +1.09 billion lei from land taxes,
• +1.18 billion lei from taxes on cars and other means of transport.

The executive emphasized that these amounts remain in full at the local budgets, given that the state budget can no longer support additional transfers due to the budget deficit.

Cars, taxed according to pollution

In the case of passenger cars, the taxation system based on cylinder capacity was kept, but the values ​​applied to each fraction of 200 cubic centimeters were increased and differentiated according to the Euro pollution norm. Thus, older and more polluting cars will pay higher taxes, while vehicles with recent Euro norms will have more moderate increases, the Government explained.

For hybrid cars, the Government stated that simply being in the “hybrid” category is no longer sufficient for tax benefits. According to the PNRR requirements, the advantages only apply to vehicles with emissions below 50 g CO₂/km.

The executive admitted that the application of the measures was affected by delays and malfunctions, including calculation errors and technical problems at the ghișeul.ro platform, generated by the compressed calendar and the decisions of the Constitutional Court.

Authorities say they are currently working on fixing these issues.

News being updated.