The “Fiscal Revolution”, postponed again. President Iohannis: A significant delay in tax measures would be required

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FinMin Misa: Gov’t to consider ordinance amending the Tax Code on Wednesday. PM Tudose: Gov’t might not discuss it on Wednesday

 

The Government’s extraordinary meeting on amendments to the Tax Code was officially postponed for the second time. Scheduled initially on Friday, it was postponed for Monday.

Prime Minister Mihai Tudose announced on Monday that the government meeting will be postponed and will take place on Wednesday “as usual”.

However, Tudose announced that  “there is a possibility” that the amendments to the Tax Code should not be discussed in the Government meeting scheduled for Wednesday.

Asked if the transfer of contributions from the employer to the employee will be discussed at the Executive meeting on Wednesday, the prime minister said: “It may not be Wednesday”.

In turn,  Finance Minister Ionut Misa stated on Monday that the Government on Wednesday will consider a draft ordinance amending the Tax Code, including the transfer of social contribution payments from employers to employees

“We have had a discussion with the prime minister. The prime minister has had talks at the party and on Wednesday a government meeting will be held, as announced, that will include the ordinance as already read for the first time, complete, with the transfer of contribution payments,” Misa explained, adding that he discussed with the prime minister in the afternoon.

“He told me that he had a discussion at the party level and on Wednesday the ordinance will enter the government meeting,” said Misa.

According to him, the government meeting to debate the ordinance amending the Tax Code announced for Monday was postponed because “there were some delays in opinions being issued on it,” but now “we have all the opinions”.

Asked if the uniform public pay law could be applied as adopted, with a 25-percent wage increase as from January 2018, the minister replied that it could apply without any problems because “at the time the transfer of contribution payments was thought as a measure in the governance programme, the whole range of tax measures was taken into account and there will be no negative effect on the pay law.”

About the negative opinion issued by the Fiscal Council on the draft ordinance amending the Tax Code, Misa said that the organisation raised some issues that were mentioned in the substantiation of the draft in terms of impact, but that implementing the measures provided for therein will be no problem.

“There is really a negative opinion from the Fiscal Council. The Fiscal Council raised some issues that we included in the substantiation of the draft, the impact assessment, the ones we took into account, so it’s not a surprise from this point of view, but implementing these measures will not be a problem in terms of the 2018 deficit or budget,” Misa said.

 

 PM Tudose: Gov’t might not discuss it on Wednesday

 

Contrary to Misa’s statements, Prime Minister Mihai Tudose said on Monday that the Government on Wednesday might not discuss the amendments to the Tax Code.

Asked if switching the payment of social security contributions from employers to employees will be discussed at the government meeting on Wednesday, Tudose said: “It might not be Wednesday.”

Attending a meeting of the Romanian Association of Municipalities (AMR), Tudose said that the fiscal package also concerns other things that have economic and financial aspects.

“Do not understand that the fiscal package only concerns these things; there are many things that take into account economic and financial aspects of regulation in the fight against contraband, better discipline of Value Added Tax (VAT) payment. We are talking about a larger package, even if the contributions are not included in the first meeting on Wednesday, or at least I believe they will not. Many colleagues believe that things will be offset by a formula set up with you, from large municipalities, from the Bucharest City Hall to the smallest commune in Romania. We do not want to create imbalances, on the contrary,” Tudose said.

He showed that a balanced development of the country is needed.

“You all have over 10 billion lei in your budgets, which are not used, which simply stays idle. The calculation has not considered factoring in the minimum wage. There was no meeting yesterday or the day before, or today, and that will not be regulated until we, together with you, agree on that balancing formula you were talking about. Infrastructure and other services have been achieved using the money of the whole country. When we finish the simulations on this budget balancing formula, we’ll validate it with you. A balanced development of the country is needed,” Tudose said.

His comments came in response to statements made by AMR Executive Chairman Ilie Bolojan who said that the Government’s intention to modify the Tax Code is one of the issues that concern the association.

“This intention, which we do not dispute in the form in which the proposals have been made, leads to a smaller amount we consider for calculations namely in the aggregate income tax, which means a reduction in the tax base of about 40 percent according to our simulations; given that the aggregate income tax accounts for about half of the revenues of a municipality in Romania, our calculations show that our income, out total own revenues, would decrease by at least 20 percent, if this measure is approved without there being any other form of offset for the loss in the aggregate income revenues,” said Bolojan.

In his opinion, the simulations made by AMR show that in fact an increase in the public healthcare fund revenues is done to the detriment of the funds that remain with the local administrations, and the main affected areas are not the communes of Romania with very few employees, but the municipalities where about two thirds of the country’s employees are employed.

 

 Tariceanu: When we’re talking about Gov’t adopting a package of such important measures, rapidity is not the key factor

 

The Alliance of Liberals and Democrats (ALDE) Chairman Calin Popescu Tariceanu stated on Monday, at the Palace of Parliament, that in his opinion there is no problem with the successive postponements of the Government meetings that should have adopted the emergency ordinance amending the Tax Code, claiming that rapidity is not the key factor when the Government adopting a package of such important measures is concerned.

“I believe that when we’re talking about the Government adopting a package of such important measures, rapidity is not the key factor. I believe that, on the contrary, the need to calmly analyse all aspects and all consequences that such a decision entails is a normal act after all, an act of minimum wisdom,” Calin Popescu Tariceanu stated when asked whether it is good that the adoption of the new fiscal measures has been postponed for the time being.

The ALDE leader added that no ruling coalition meeting has been convened to discuss the situation generated by the postponement of the second extraordinary Government meeting on the amending of the Tax  Code.

Asked whether the option of adopting the fiscal measures via emergency ordinance continues to remain set in stone, Tariceanu said: “Don’t ask me what the Government is doing because, as you know, according to the separation of powers principle, the Government decides on its own what it must do. Of course, we cooperate with the Government and if the Prime Minister feels the need to consult Parliament he will undoubtedly do so.”

 

Firea: Package of fiscal amendments must be revised. It would be a very great blow to all communities

 

The package of fiscal amendments must be revised because it will not bring about good things for local administration, quite the contrary, “it would be a very great blow to all communities,” Bucharest Mayor Gabriela Firea stated on Monday at the end of the Association of Romanian Municipalities (AMR) meeting.

Firea said that the fiscal amendments will not bring about good things, quite the contrary, because the budget funds for investments will be lower.

“I stated, during the AMR meeting too, that for all municipal city halls, not just for the Bucharest City Hall, this package of fiscal amendments will not bring about good things, quite the opposite. On the contrary, since there would be fewer funds for investments, it would be a very great blow to all communities,” Firea stated.

She said she asked for the improvement of this bill and received a positive response from the Premier.

“That is why I asked for an improvement of this bill and I’m glad I got a positive response from the Premier too, who understood that municipalities will be affected and wants to improve this bill,” the Bucharest Mayor stated.

Gabriela Firea stated that in Bucharest the situation is even more difficult because Bucharest contributes 15 percent to the national GDP and receives only 0.7 percent through redistribution.

The Bucharest Mayor added that the Premier has invited the representatives of the AMR at the Victoria Palace on Tuesday. “He has invited us to a meeting at the Victoria Palace tomorrow. We too made calculations, the other municipalities did so too, and the figures are roughly in that ballpark and there will be a large budget deficit. This argument of the budget surplus, that there was a fair amount of money left unused by city halls at the end of the year – there are important causes [for that] and they do not concern poor administrative management,” Firea added.

 

Ponta: I hope Tudose wins battle with Dragnea today, should no longer adopt that nonsense about the transfer of contributions

 

Lower House member Victor Ponta stated on Monday that he hopes Premier Mihai Tudose “wins the battle” with PSD President Liviu Dragnea today and will not adopt “that nonsense about the transfer of contributions” from the employer to the employee.

“There’s nothing left from all the stories about hikes, salaries. I hope Tudose wins the battle with Dragnea today,” Ponta stated at the Palace of Parliament.

“He should no longer adopt that nonsense about the transfer of contributions. He should do like he did with the split VAT. How did he put it? ‘It’s been forgotten.’ Dragnea said the split VAT is very good, Tudose buried it and he did well. If he buries this transfer of contributions too – which is mega-silliness, it’s something terrible, just like the payment of contributions for part-time contracts – and announces that ‘we will no longer touch the Fiscal Code’ (the one adopted by PSD in 2015, because it isn’t Ponta’s or Teodorovici’s, it was approved by everyone, and promulgated by Iohannis, and loved by everyone), then we can breathe a sigh of relief, at least from an economic standpoint,” Victor Ponta added.

He claimed that “the salary law was drafted poorly and deceitfully.”

“They had no backing. I too liked to hike salaries. You think there’s anyone who doesn’t want to hike salaries? But I was first collecting money and then distributing them, as I did with the professors, with the medical doctors. Dragnea pulled a Teleorman [County] trick, meaning he had no money but he said he’d distribute them, and now he has nothing to distribute,” Ponta added.

The ex-Premier pointed out that the 2018 state budget bill can be sent to Parliament only based on laws already in force.

“You can’t come up with the budget law saying you’ll adopt something sometime. It can’t be done. (…) As drafted – not by the Government, but by Mr Dragnea with Olguta –, the salary law is a law that can’t be enforced. If enforced, it will lead to hundreds of thousands of lawsuits and, in fact, this trick – I’ll give you 25 percent by I’ll take 21 percent from you – is a swindle and people will be angry, rightfully so. (…) In the private sector, based on this law, the salaries will drop,” the MP added.

Ponta emphasised that it would be good for Premier Tudose not to approve the fiscal amendments.

“So, if Premier Tudose does… After all it’s his signature, Dragnea is trumpeting on television for naught. If Tudose does not sign (…), it’s a good thing. But at any rate, to keep announcing nonsense and then not doing it, that’s still not something smart, it looks like the governance of madmen. They keep hurling a rock then pulling it out of the water. You can’t govern like this,” he added.

Asked whether he has had any other discussions with PSD leaders, Victor Ponta said he is talking with his former party colleagues, but that some of them are afraid.

“I’m not shutting up out of fear of Dragnea and, as you saw, yesterday in Deva they won 5,000 votes, I won 3,000 votes. Having a bit of courage matters. (…) Yesterday, on the day of the elections, Dragnea went shopping in Vienna. Before, he was staying at the party headquarters, handling the count, the votes, getting people out to vote. Now he’s handling shopping and PSD is taking a beating,” Ponta said.

 

President Iohannis: A significant delay in tax measures would be required

 

President Klaus Iohannis said on Monday that a significant delay in the amendments to the tax legislation would be required, adding that the January 1, 2018 deadline for their application is inopportune.

“We have all seen that besides the initiators, everyone is against these changes. I think anyone who wants to make so wide changes and sees that no one wants to go along should pause and think. It requires a significant delay, at the very least, a very well-grounded study, and then things can be discussed peacefully. I think it is totally inopportune to aim for January 1, 2018 as the implementation deadline,” Iohannis said after attending a gala of the Association of Romania’s Municipalities hosted by the Athenaeum in Bucharest.

He reiterated that the amendments to the tax legislation represent a fiscal and budgetary “cavorting” of the Government.

“I think you remember that a few days ago, last week, I showed my whole skepticism about the changes in the tax legislation. I called this PSD behaviour cavorting in the tax and budget area and everything I have seen on television and all I heard today confirms that my assessment was as accurate as possible. I would have preferred to see today a Government determined to make serious assessments, to come up with real-world simulations to see if these measures are really the best or not; I did not see that, I saw instead meetings between the same politicians who came out with the same opinions,” said Iohannis.

He added that he had not talked with Prime Minister Mihai Tudose.