Official sources claim that raising the flat tax is necessary to increase wages and pensions without increasing the deficit.
At the end of their latest meeting, USL leaders discussed about possibly lowering the VAT and raising the flat tax following further discussions on the 2014 budget structure and about the need for additional funds, sources within USL have stated, as cited by Mediafax. According to the same sources, Prime Minister Victor Ponta suggested raising the flat tax currently set at 16 percent, and lowering the VAT currently set at 24 percent. The values proposed were 20 percent for the flat rate and 22 percent for the VAT and another alternative was leveling the two taxes in relation to subsequent simulations for the 2014 budget. “It was only a discussion had at the end of the USL session without sitting down to actually talk about it,” the cited sources said.
USL’s government agenda for 2013-2016 is aimed at maintaining the maximum taxation threshold of 16 percent and gradually introducing a differentiated wage tax with fiscal deductions, namely through rates of 8 percent, 12 percent and 16 percent set according to wage categories.
Official sources say that raising the flat tax will be necessary if the IMF and the EC do not accept a higher 2014 budget deficit from EU co-financing, which would enable wage and pension increase, especially following a nine-month cash-in much below the initial agenda at the start of the year. In addition, after the first nine months, budget revenues were approximately RON 6 billion below the assessment forecasted at the start of the year due to below-level banking performances caused, in turn, by amendments in taxation legislation, a lower collection rate resulting from ANAF’s restructuring process, and the failure to achieve profit levels estimated by BNR.
PNL says ‘no’ to the flat tax
PNL chairman Crin Antonescu admitted late Wednesday that USL had a discussion about raising the flat tax, but it was ”informal” and “hypothetical,” adding there were no proposals from PSD or PNL and no one made a definite statement. The PNL leader commented that, during his visit to the U.S., PM Victor Ponta referred to a 6 percent flat tax, a relatively low level. “One aspect is certain – as long as it is part of the ruling power, PNL will never agree to raising the flat tax, not because of ideology or partisanship, but for the simple reason that it is unimaginable for an already very slow-moving business environment to be able to bear a flat rate increase,” Antonescu stated during an appearance on Realitatea TV. He pointed out that the Finance Minister is pleading for an increase in royalty fees, not in taxation, in view of increasing state budget revenues. The PNL leader admitted lowering the VAT was discussed at the USL meeting, but only hypothetically.
Later, in a press release issued yesterday, Daniel Chitoiu, Finance Minister, stated that PNL “does not and will not support any measure to raise the 16 percent flat tax.” “The measures invoked are not part of the government agenda and PNL will remain consistent with commitments undertaken under this fundamental document of the USL administration that was approved by the Romanian Parliament,” the cited press release notes.
Liviu Voinea, Minister Delegate for the Budget, explained that this year’s economic growth being mainly based on exports is negatively reflected by the state budget because it involves VAT reimbursements. The solution for achieving larger revenues in 2014, according to Voinea, could come from consumption in the private sector and applying an internal aggregate increase in public investments, EU programs included. “Discussions are still preliminary, so bringing up for debate any fiscal measure without a sound starting point would be premature,” Voinea said.
When asked to comment on Chitoiu’s statements, Deputy Prime Minister Liviu Dragnea (PSD) replied: “What can I say? As far as I know, at least before coming to this serious meeting, Mr. Daniel Chitoiu was the Finance Minister.” Referring to rumors about raising the flat tax to 22 percent, Dragnea said “a smidgen” of USL’s discussion on proposals for increasing budget revenues was made public by sources, and he pointed out they were in fact simulations carried out by experts.
PDL requested the Ponta administration “to give up its intention to raise the flat tax,” or else it would submit a censure motion with support from PNL, Adriana Saftoiu, spokesperson for PDL, stated Thursday.