Romania's ruling Social Liberal Union (USL) aims to replace a flat tax on income with a three-level scheme to protect low earners in the EU's second-poorest state if it wins an election next month, Reuters reports.

The USL, which came to power in May after toppling a previous centrist coalition in a no confidence vote, is in prime position to win the December 9 elections with around 50% of the vote. The election has inevitably raised political risk, with investors worrying about policy changes and election promises. Romania is in receipt of a EUR5bn IMF-led deal, so any tax cuts would have to come with additional revenue sources to offset the budget gap.

"We will keep the 16% ceiling and introduce during our (four-year) term a differentiated tax on wage income with ... rates of 8, 12 and 16%," the party said in its governing programme released on Thursday.

The USL also wants to lower employers' social tax contributions by 5 percentage points and raise the minimum wage to 1,200 lei ($340) from the current 700 lei over four years. It also said it will cut sales tax to 19% from the current 24% from 2016.

Source: bne