Gov’t wants to increase minimum wage, scratch tax on small incomes

The announcement was made yesterday by Premier Emil Boc, in the meeting of the National Tripartite Council.

By    Daniela Baragan

The government analyses the possibility of increasing the minimum wage from RON 670 to RON 700 – a top level it cannot exceed in the absence of incomes to the budget – simultaneously with eliminating the income tax for salaries between RON 700 and RON 1,000. According to Government calculations, easing the fiscal burden would have an impact on approximately 600,000 salaries that range within RON 700 and RON 1,000. An initial discussion in this regard took place yesterday, during the meeting of the National Tripartite Council attended by PM Emil Boc, along with representatives of employers’ federations and trade unions. During talks, trade unionists however demanded the minimum salary to be raised from RON 670 to RON 1,000.

According to government sources quoted by Mediafax, the variant taken into consideration for wages between RON 700 and RON 1,000 refers to eliminating only the income tax, while leaving social contributions in place, and there is no clear date when the changes might be enforced. Two weeks ago, Finance Minister Gheorghe Ialomitianu announced that the Government negotiates with the IMF an increase of the minimum gross salary from RON 670 to RON 700, and talks about this change will also be held with employers’ organisations. At that time, the ‘Cartel ALFA’ trade unions federation said that the government’s intention to raise the minimum wage is against the very idea of “minimum wage,” which should represent a sum that covers the minimum spending per person and allows employees to pay for their basic needs. In the context, Cartel ALFA representatives said that the real value of the minimum wage, based on the minimum spending per capita announcement by authorities, should be RON 1,100.

In its turn, the Opposition criticises the Government, which it accuses of lacking “even a basic economic thinking” when it comes to raising the minimum wage. “Cutting 5 pc of the CAS (welfare contribution) paid by employers and increasing the minimum wage to RON 800 will only have a small impact on the budget. (…) An increase of the minimum wage to RON 800 would also have the benefit of bringing to light much of the illegal work. But the acting Government has no economic conception, unless Jeffrey Franks comes to tell them what they should do,” PSD leader Victor Ponta said.

Opposition’s amendments rejected one after another

Discussions over the state budget of 2012 in the specialised committees of the Parliament continued yesterday in the same mood as the previous day: only few of the hundreds of amendments submitted by the opposition were accepted and most of them got rejected one after another, while legislators on both sides quarrelled all day long. The vote for the budget of the Ministry of Transport and Infrastructure (MTI) sparked a fierce controversy in the Industry and Economy committees, but the budget got through with a score of 21 to 6. The clash began when Senator Varujan Vosganian lashed out at Minister Anca Boagiu, who complained about the dire situation she inherited form the former PNL governance.

“I would suggest you mull this over.  What if we tell Romanians that their current salaries are too high, as the economy could decline by 7 pc next year, and you would not be able to pay them the salaries you are now?”, the Liberal asked. Furthermore, he accused Boagiu of being rather unaware of what capital expenses are. Anca Boagiu  hit back saying that Vosganian, a National Liberal Party (PNL) senator, put on a show for the sake of television cameras. During the hearings, Anca Boagiu held that the MTI will complete next year nearly 90 kilometres of motorways, the stretches Bucharest-Ploiesti and Medgidia-Constanta namely, with a further 550 km along the Pan-European Corridor 4 to be opened to traffic in 2013.

Also yesterday, the members of the budget-finance commissions passed the second budget adjustment this year. The emergency ordinance was criticised by lawmakers with the Social Democratic Party (PSD) and the National Liberal Party (PNL), who voted against. On the other hand, the Finance Minister, Gheorghe Ialomiteanu, stated yesterday, during the debate on the draft budget, that Romania will not have to take further measures to adjust budget expenditures in 2012, irrespective of what will happen on international markets. “Romania has a very good image throughout the European Union and at international level, because it timely adopted adjustment measures, without waiting for EU decisions, measures that helped Romania avoid collapse,” Ialomitianu stated. He pointed out that the budget is based on an economic growth of 2.1 per cent, a growth that relies on investments from the state budget and on a 3.9 per cent growth in the constructions sector, a 2.7 per cent growth in the industrial sector and a 1.6 per cent growth in the services sector. In what concerns the amendments filed by the Opposition, the official stated that the Ministry’s experts seriously analyzed them and their effect would be to hike the budget deficit by 3.8 per cent or to put at risk expenditures on pensions, teachers’ salaries or the functioning of state institutions. “No EU country, no matter whether it has a socialist or right-wing government, has applied a set of measures of this kind, measures that would lead to a hike in expenditures and a drop in revenues,” the Finance Minister added.

Ialomiteanu also said that next year’s budget will include the revenues obtained from the selling of buildings owned by the Romanian Administration of State Assets (RA-APPS), put at RON 700 M, showing that the revenue projection is a cautious one, expressing his hope it will come true too.

Despite the 2012 Foreign Intelligence Service (SIE) budget being higher than this year’s making quite a stir in the media, the specialised commission unanimously passed the institution’s budget, up 3.4 pc from 2011. The opposition-proposed amendments were not taken into account in this respect neither.

The Ministry of Foreign Affairs (MAE) budget next year, which stands at RON 86,700 thousand, of which RON 86,090 thousand for current spending, also passed without any amendments being made, and in record time (less than nine minutes). This also applied, more or less, with the social security budget too, where just one PSD-advanced amendment passed, of the 18 proposed. The Education Ministry 2012 budget proposal of RON 20 bln did not go through the education commissions Monday, with the vote being pushed back, after lawmakers did not reach common ground on whether to vote the 820 amendments in bulk or separately.

The budgets of the National Sanitary Veterinarian and Foodstuff Safety Authority (ANSVSA) and the Environment Ministry  also got a favourable vote. Mediafax reports that the vote by the joined agriculture and forestry commissions was rather ‘odd”, given commission members passed the budgets despite not attending the session or leaving the session before the final vote, by phone or notes to the commission chairman.

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