Size of government in Romania is modest as compared to other European countries, with government expenditures reaching 34% in 2014. After the strong recession in 2009, Romanian economy has rebounded with robust growth in European terms since 2013. Harsh fiscal austerity measures introduced since 2010, by cutting public expenditures as well as by raising taxes, have substantially decreased the level of fiscal deficits (from 7.1% of GDP in 2009 to 1.9% in 2014), leading to a more sustainable public debt, which increased threefold since 2008, to 40.6% of GDP. State-owned enterprises remain one of the weak points of the Romanian economy: they are numerous and play a notable role in the economy. However, their performance is low, with low profitability, accumulated arrears and the reliance on
government transfers for needed investments. Further involvement of the private sector in this area is necessary in order to hurdle investments and increase performance, by majority or minority privatization or other public-private partnership arrangements. Personal income and corporate income taxes in Romania are flat, all set at 16%. However, VAT is high, with the standard rate of 24% and reduced rates, for certain products, of 9% or 5%. In June 2015, a plan for a substantial reduction of VAT rate was introduced, aiming at 20% standard VAT rate from January 2016 and its futher decrease to 19% in 2017. This move, although a moderation from the previous plan under the influence of the European Commission and the International Monetary Fund, and generally a step in a good direction, still poses a significant fiscal threat and therefore calls for more efforts in making the program sustainable, by improving the tax coverage. Labour tax wedge in Romania is high due to social contributions which remain high, approximately 47.5% when applied on an average wage. They are surpassing those of Belgium, a country which has the highest labour tax wedge in the OECD.