President Basescu continues to disagree on excise increase, calling it, in a letter to the head of
government and later in a statement at the Cotroceni Palace, abusive and unnecessary for the economy. In reply, PM Ponta says this measure brings money to the budget and eliminates tax evasion.
April is the bearer of bad news for the Romanian people. Gasoline and Diesel fuel prices will go up, following the Government’s introduction of the additional 7 eurocents/liter of fuel excise tax. As of now, fuel excise taxes will be as follows: EUR 491.19/1,000 liters of leaded gasoline, EUR 429.59/1,000 liters of unleaded gasoline, EUR 400.395/1,000 liters of Diesel fuel, and EUR 445.91/1,000 liters of kerosene used as motor fuel. The estimated increase in car fuel prices will be around 7 or 8 percent, namely approx. 40 bani/liter.
However, road carrier companies will be less affected by this increase because the Gov’t plans to give road carriers 4 out of 7 eurocents back on a quarterly basis and upon proof of fuel purchase. The legislative act regulating this system is to be approved in a Government session tomorrow, Prime Minister Victor Ponta announced Sunday on Romania TV. He also stated yesterday that this ordinance will have a two-fold effect – it will support competitiveness and prevent tax evasion.
If the budget reserved for the purchase of fuel does not change after the 7 eurocents additional fuel excise tax takes effect on April 1, drivers will be travelling 1,100 kilometers less every year, according to a study conducted by Daedalus Millward Brown and commissioned by VeziCatFace.ro. The study also shows Romanians travel 14,700 km on average per year, of which 57 percent in urban areas, and mean gasoline and Diesel fuel costs will go up by RON 505 and RON 415, respectively, after the excise tax goes into effect. Given the current budget, every car refuel will be c. 3.5 liters lighter, which means Romanian owners of compact cars will be travelling 50 kilometers less.
Basescu writes to PM Ponta again
On Monday, President Traian Basescu sent a new letter to Prime Minister Victor Ponta, ‘asking’ him not to introduce the 7 eurocents fuel excise tax on April 1. “I see you have not changed your mind and still wish to put a new fiscal burden on the citizens of Romania at any cost. I urge you once more not to implement an increase in the fuel excise tax as of April 1, 2014, given the major negative side-effects such a measure can have on the economy and the Romanian population,” President Traian Basescu writes in his open letter to PM Victor Ponta. According to President Traian Basescu, “the compensatory budgetary alternative to raising the 7 eurocents excise tax was presented when the 2014 State Budget Law was approved; this measure is unjustified if the Government’s interest is to generate sustainable economic growth, since the budget contains the necessary resources to compensate for it.”
“Back then, I suggested several compensatory measures. Mr. Prime Minister, I urge you to improve budget revenue collections. An improvement in this respect will save Romanians from having to pay new fees and taxes like this increased fuel excise tax. (…),” the President argues in his letter.
Furthermore, Traian Basescu shows two of the immediate effects of this measure on both the economy and the population will be lower consumption levels and higher prices. The head of state notes that his persistence in relinquishing the excise tax is related to an analysis on this year’s budget. According to the President, the Gov’t announced a partial compensation for this excise tax increase (by more than half) applicable to road carriers, which will be funded through the state budget. “There is still a risk, as road carriers themselves have pointed out, that a high percentage of current refuels on Romanian territory will move abroad, thus leading to decreased consumption levels and a negative impact on the state budget,” he says. Moreover, Traian Basescu claims the Minister Delegate for Agriculture has announced the excise tax increase will be compensated through subsidies on increased costs from state budget funds. Consequently, considering that partial or total compensatory measures were found in the road carrier and agriculture sectors, the only category of consumers who will not be receiving state budget funds in order to diminish the effects of the tax increase are the citizens of Romania.
President Traian Basescu sent a previous letter to PM Victor Ponta on March 25, asking him to relinquish the announced increase in fuel excise tax levels, because the measure would put too much unnecessary pressure on consumers and the economy.
In retort, Premier Victor Ponta said that President Traian Basescu “forgets” writing ex-PM Emil Boc about the fuel price, which had soared 70 pc during his mandate, but now writes letters to support Elena Udrea with her limousines. He mentioned that, during the mandate of Boc and Basescu, all prices went up and the two brought Romania to “budgetary and economic catastrophe.”
“There is no internal document between the government and the IMF which compels Romania to enforce the excise. The excuse said by Ponta about the IMF forcing us to do it is a lie. Same as there is no mention in the documents about the <electo-rate>, which I see he no longer speaks much about now,” President Basescu stated yesterday at the Cotroceni Palace.
As regards the premier’s criticism against ex-premier Emil Boc, the president claims that he did not do it because Romania has a treaty of accession to the EU which mentions that Romania will enforce excise duties of EUR 359/1,000 litres of petrol by January 1, 2011. The same treaty compels Romania to enforce excise duties of EUR 330/1,000 litres of petrol by January 1, 2013. Romania thus complied with the Accession Treaty negotiated in 2004, when Victor Ponta was chief of the Control Body of PM Adrian Nastase.
“I want to stress that you cannot lie in public, especially when you are premier. One cannot govern only with lies. I could not reprimand Emil Boc because in crisis, paradoxically, due to the massive drop of the output by OPEC countries, the price of the barrel of crude increased, same as the quotation at the London Exchange,” the president mentioned, reiterating that the measure regarding the excise on fuel is “useless suffering for the economy and for population,” abusive.
According to Basescu, through this supplementary tax of RON 0.42 PM Ponta wants to create resources for financing barons in view of the electoral campaigns of this year. Moreover, Basescu claims that many will demand to be refunded the EUR 0.04 excise by the Ministry of Finance. Administering the excise will have a high cost.
“What Ponta expects, that the refund will be operated quarterly, thinking that he will set the system in place during these 3 months, is an error. It cannot set it in place. And then he has 2 alternatives: either he cheats transporters with promises to refund, or he will not pay,” the president of Romania concluded.
In a statement delivered at the Victoria Palace yesterday evening, PM Ponta pointed to the fact that what President Basescu said is true, respectively the fact that before enforcing the excise on fuel, Romania had the lowest prices for petrol and diesel in all 28 states of the EU, but: “We are seeking medium- and long-term financing, not just for this electoral year, and the money resulting from this new tax will be also used as co-financing for other projects of infrastructure. For this goal, I can sustain a small electoral battle with President Basescu,” Ponta stressed.
Gas prices go up, as per price deregulation agenda
Gas prices are also expected to hike, both in the general consumption and company consumption categories by 2 percent and 5 percent, respectively. These price changes were included on the gas price deregulation agenda agreed-upon by the Romanian Government, the International Monetary Fund, and the European Commission. According to the National Agency for Energy Regulation (ANRE), two subsequent increases are scheduled for the near future. Niculae Havrilet, president of ANRE, has stated that prices will go up by 5 percent for non-household consumers and 3 percent for household consumers as of April 1. A second wave will hit the population on October 1, as prices will go up by 4 percent for non-household consumers and 3 percent for household consumers.
As of April 1, cigarette prices will likewise suffer a 5.4 percent increase from EUR 56.71/1,000 cigarettes to EUR 59.77/1,000 cigarettes, which will in turn generate a 3.16 percent higher excise tax of EUR 84.37/1,000 cigarettes. The new price will be stable for one year, from April 1, 2014 until March 31, 2015, in accordance with the Fiscal Code. According to a study conducted by Novel research company, under the counter cigarettes reported sales of 15.7 percent this January, the highest figures of the last two years and a half.
Prices may increase in other product categories as well as a result of higher fuel prices, which could generate a chain reaction in the entire economy. In addition, other seasonal products such as lamb and eggs may become slightly more expensive around the Easter holidays.
Cheaper phone calls trying to soften the situation
Nonetheless, one category of prices have dropped starting today – phone calls between networks. The European Commission has approved the National Authority for Management and relations in Communications of Romania’s (ANCOM) decision to lower phone call fees. Consequently, maximum fees for phone calls to Romanian landline networks will drop from 0.67 eurocents/minute to 0.14 eurocents/minute, whereas maximum fees for phone calls to mobile networks will drop from 2.07 eurocents/minute to 0.96 eurocents/minute.
A further change will be implemented on April 1 where identity cards are concerned; Romanians will be able to choose between the current form of identity cards and electronic identity cards containing multiple personal details.