Government simulates flat tax of 10 pc

The Government simulates lowering the flat tax from 16 per cent to 10 per cent while maintaining the VAT at 24 per cent, government sources confirmed by Andreea Paul Vass, Premier Emil Boc’s personal advisor, stated for ‘Gandul’ daily. She admitted that the Government is working on a plan to lower the flat tax to 10 per cent and to maintain the VAT at 24 per cent starting in January 2011. “We are running such simulations. I cannot give you details because the plan needs a political decision,” she pointed out. According to her, in an optimistic scenario the state would have to raise RON 7 bln in case the flat tax is lowered to 10 per cent, while in a pessimistic scenario the state would have to raise RON 9 bln.

Some economic analysts claim that lowering the flat tax would theoretically represent a good measure but such a decision is practically impossible to take considering that the budget losses reported in that case would reach approximately 1.8 per cent of GDP. One of the solutions for covering the approximately EUR 2 bln shortfall that would result after cutting the flat tax by 6 per cent would be to speed up tapping European funds. Daniel Daianu, former Finance Minister and chief economist of BNR, believes that the officials are playing with words, stressing that lowering the flat tax to 10 per cent would not have the planned effect because the economic environment is not favorable for drawing in investments.

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