The Premier had a change of heart after Finance Minister Daniel Chitoiu warned earlier that the Liberals would quit the Cabinet if the flat tax is hiked.
Premier Victor Ponta stood down after disputes appeared within USL as a result of leaks according to which USL representatives were allegedly taking into account hiking the flat tax to 22 per cent. Ponta said yesterday that the flat tax will be maintained at its current level of 16 per cent without a switch to progressive tax, because this represents a decision adopted ever since the USL formed. “In principle, as any Social-Democrat – although progressive tax exists in Germany too, and Mrs. Merkel is not a Social-Democrat, or in Great Britain – in general I support the idea, the principle, however we have a very clear political agreement since the USL formed, namely keeping the flat tax, and the flat tax remains at 16 per cent,” Ponta said, being quoted by Mediafax.
Before Ponta’s statement, PNL President Crin Antonescu said yesterday, after a meeting with Liberal ministers, that “the whole discussion about hiking the flat tax did not and does not have any basis.” “The hiking of taxes, of the flat tax and so on, is out of the question. This discussion will be over and the Prime Minister, the Finance Minister, will give all explanations. Have a little patience,” Antonescu said. He admitted that “from a financial standpoint there is a hole in the budget, not from a political standpoint.” In this context, Antonescu reiterated that he does not support the hiking of taxes and fees and emphasized that “there is no dispute between PNL and PSD” on this issue. In what concerns taxes, fees and the budget, Antonescu says that this is “a discussion everyone will take part in”: “The moment we have a concrete option we will explain it, we will discuss. There is no point in forcing me into a preliminary discussion.” In what concerns the decentralization law, the PNL President pointed out that there still are some chapters to brush up.
On the other hand, the Finance Minister and Liberal Deputy Prime Minister Daniel Chitoiu said that PNL will not stay in government if the flat tax is hiked next year. Asked by the press whether PNL will remain in government if the flat tax is hiked next year for whatever reason, Chitoiu gave a brief answer: “No.”
Asked for his comments on Minister Chitoiu’s statement, PNL First Vice President Klaus Iohannis told a press conference that he finds the discussion “a bit artificial.”
“I believe the discussion is a bit artificial. PSD did not express its desire to do that (to hike the flat tax – editor’s note), just as we, the Liberals, are not as revolutionary as the newspapers show us to be,” Iohanis stated, being quoted by Mediafax. According to him, government officials are discussing the fact that there is a need for more money and are wondering where they can be obtained from, some stating that taxes have to be hiked, while others are stating that tax evasion has to be fought, however “no decision has been taken within USL.” Asked how money could be collected at the budget, the PNL First Vice President answered: “By combating tax evasion. The solution is fairly simple and it also belongs to the entity led by Minister Chitoiu.” He added that he cannot agree with hiking taxes, however taxes have to be collected.
PSD Honorary President Ion Iliescu said he does not believe someone currently wants to modify the flat tax, adding that doing so is not even appropriate. “I don’t want to discuss something like this (whether the Liberals will stay in government – editor’s note). I don’t believe anyone wants to change the flat tax now. It’s not even the appropriate thing to do. But I don’t know the sources of these worries, I am not aware of anyone’s intention to modify the flat tax,” the Social-Democrat stated.
Information about the possible hiking of the flat tax and lowering of the VAT appeared at the end of last week. Back then, sources quoted by Mediafax stated that USL leaders discussed the two options at the end of USL’s meeting, against the backdrop of talks concerning the 2014 budget and the need for extra funds. The aforementioned sources pointed out that the idea of hiking the flat tax, which currently stands at 16 per cent, and lowering the VAT, which now stands at 24 per cent, was forwarded by Premier Victor Ponta. Thus, a level of 20 per cent for the flat tax and 22 per cent for VAT was discussed, or the option of bringing them both to the same level, depending on the possible simulations conducted for the 2014 budget. Subsequently Ponta confirmed that he was the one that asked the Finance Minister for various scenarios on hiking budget revenues, scenarios discussed within USL, and he pointed out that he is waiting for his conclusions. Ponta however pointed out that he will not hike the flat tax. On the other hand, the Premier announced that the government will conduct an analysis at the end of the year and, if it notices that the National Fiscal Administration Agency (ANAF) “is still not working” then measures will be taken.
Deputy Prime Minister Liviu Dragnea stated in his turn that the Finance Ministry has to present within a relatively short timeframe the causes for which budget revenues, for which ANAF is responsible, have dropped while Romania is experiencing economic growth and the number of employees has risen. At the same time, government aide Mirel Palada stated that during last Friday’s government meeting the Premier expressed his concern with ANAF’s activity, the latter being reflected in a shortfall of budget revenues, and asked the institution to improve its performance so that the collection level foreseen at the start of the year will be reached by the end of the year.