Overcoming the crisis

The plan provides for a cut of the flat tax to 10%, of the VAT on food products to 6% and the scrapping of the minimum tax in no time. Business people also demand the exemption from penalties of companies paying their debts to the state budget by the end of the year.

“By December 31st, all companies in Romania should be exempted from delay penalties if they pay their basic debt to the state. A period of grace should thus be granted, which would be yet another solution for a rapid flow of incomes into the state budget, with the slashing of the flat tax.” said the spokesman for the Alliance of Employers Confederations in Romania, Dan Matei Agathon.

The Employers’ Associations have come up with other compensatory solutions too, including the increase in taxes on luxury lands, the sale of non-privatized shopping areas and levying a tax on online betting companies.

Business people believe that in addition to a cut in taxation, public investment is a sure, direct and immediate way of overcoming the crisis.

The Employers’ Associations estimate that another loan from the IMF should be used exclusively for economic recovery. However, the trade unions reject any type of accord with the IMF and call on the state to use money from the budget for investment and to take tougher measures to fight tax evasion.

All these proposals have been made against the backdrop of another warning given by president Traian Basescu that the situation of the pension fund is disastrous, since there is a deficit of 3.6 billion euros for 2011.

He suggested to the head of the IMF mission in Romania, Jeffrey Franks to consider extending the existing accord between Romania and the IMF or concluding a preemptive accord, in the run up to the October meeting.

The government has not looked into the proposals of the Employers’ Associations yet, but the new Finance Minister, Gheorghe Ialomitianu, made it clear that the government did not intend to cut either the flat tax or the VAT on certain products.

He said that the government was working on the 2011 state budget, starting out from the preset taxes.

“There is no question of slashing taxes. We are working on the 2011 state budget on the basis of the fiscal legislation in force. The fiscal legislation is not going to be amended. We’ll keep the 16% flat tax and the 24% VAT.” said Gheorghe Ialomitianu.

Worth mentioning is that the EU Finance Ministers have agreed that the draft budgets of the member states be first examined at European level and then submitted for approval to national parliaments.

(Radio România Internaţional, Serviciul în limba engleză).