POLITICS

President Iohannis’ decision to send Tax Code back to Parliament stirs controversy

President Klaus Iohannis on Friday sent the Senate the re-examination request on the Law concerning the Tax Code.

The head of state underscores that “the Legislature must promote a balanced and reasonable attitude, meant not to generate dysfunctions which, afterwards, may need frequent corrections of a legislative nature,” a reason for which “policies generating excessive taxation or accentuated relaxation should not be promoted in drawing up a new tax code.”

“The austerity measures of 2010 must remain history. Coming back to risky fiscal policies and with long-term negative consequences represents an experience which not only the political class can afford any longer, but, mostly, their costs should no longer be supported by the citizens,” Iohannis said in the re-examination request.

In his opinion, “the economic welfare unanimously desired by all political forces of Romania to the benefit of the citizens and the economic agents can only be reached through a responsible, long-term predictable tax-budget approach, in accordance with the sustainable economic growth objectives.”

“The mere fiscal relaxation, unaccompanied by the continuation of the process of increasing the revenue collection and by a sustainable resetting of the budgetary expenditure, for an as much reasonable as possible public money spending, may lead to accumulating imbalances which will encumber the future economic and social developments,” Iohannis points out.

 

PM Ponta: Iohannis’ decision regarding Tax Code is either purely political or taken abroad

 

Prime Minister Victor Ponta stated that the rejection by President Klaus Iohannis of the new Tax Code has as possible explanations either “a purely political decision to block the economic activity of the Government at any cost”, or “a decision taken outside Romania and against Romania’s interests.”

“The decision made by Mr. Klaus Iohannis to reject the new Tax Code (agreed and lauded by the business environment, unanimously voted in Parliament, awaited by the Romanian society as a whole not only because it slashes the VAT to 19pct, but because it guarantees the economic and social development of the country) has only two possible explanations: it is a purely political decision to block the economic activity of the Government at any cost (what Traian Basescu did regardless of the negative consequences); it is a decision taken outside Romania and against Romania’s interest that Mr. Iohannis must apply at any risk (something not even Traian Basescu would have ever done),” said the Prime Minister on Friday on Facebook.

According to Ponta, “regardless which of the two options is real it is the worst possible news for Romanians (and to those who voted in November the clearest sign they were cheated).”

“The good news is that today we may note the end of all illusions regarding the new PNL [National Liberal Party] (more servile and untrustworthy than even the old PDL [Democratic Liberal Party]) – after all they said of how good the Tax Code is, that is in fact Liberal, after they placed in their governance programme the 19pct VAT as a linchpin (the amendment in the Budget Commission was theirs) and after they unanimously voted three weeks ago in the Chamber of Deputies for the draft – they will now say that Iohannis is right and the Fiscal Code is very bad!!! It is clear that the new PNL is led by representatives that are not only servile and villainous, but they are true political slugs!” the Prime Minister concludes.

 

PNL’s Predoiu: Arguments included in Tax Code re-examination request are correct

 

National Liberal Party (PNL) first deputy chairman Catalin Predoiu told a press conference on Friday that the arguments for which President Klaus Iohannis sent the Tax Code back to Parliament are correct and that the re-examination of the document “is required as a consequence of bad governance”.

Predoiu told a news conference on Friday that economic reforms are needed for a successful implementation of the Tax Code.

“In the PNL programme, in our public statements, we have said even before the adoption of the code, in parliamentary debates, that economic reforms are needed for its successful implementation and that in no case can we switch to pro-cyclical measures unless the financial and budgetary balance is preserved. This is no post-factum reaction, but our constant reaction we used to warn and demand the Government to do its job to prepare the successful implementation of the Tax Code. (…) We do not disregard our governing programme, but we are invoking it because in it there are both reform measures and measures to accompany and achieve tax unburdening, all for the preservation of the financial and budgetary balance,” said Predoiu.

In his opinion, Prime Minister Victor Ponta “is switching discussion from an overdue governance issue to a political matter, where he is not right either.”

Predoiu argues that Finance Minister Eugen Teodorovici’s statement that the PNL governing programme does not include accompanying measures is false. “Page 89 in the governing programme is the beginning of the finance and budget chapter. It starts with three pages of preparatory measures, accompaniment and economic reforms that are to be taken to prepare for fiscal measures. I am inviting Mr Teodorovici to read pages 89, 90 and 91 in the PNL governing programme,” said Predoiu.

He added that there would be some unachieved objectives in the economic programme conducted by the Romanian Government jointly with the International Monetary Fund (IMF), the European Commission (EC) and the World Bank, arguing that the Government has failed as far as offsetting measures for the Tax Code were concerned.

 

PSD’s Rovana Plumb: It is regrettable that Tax Code was not promulgated

 

Social Democratic Party (PSD) ad-interim chairperson Rovana Plumb stated, on Friday, in Piatra Neamt that it is regrettable that President Klaus Iohannis chose to not promulgate the Tax Code.

“It is regrettable that this Tax Code was not promulgated. It is Romania’s chance to develop. I request the PNL [National Liberal Party] representatives to support the adoption of the Tax Code as it was in its original form. Romania has economic growth, money adopted and collected by the budget following a combating of illegal labour and due to those who work to recover unpaid taxes and tariffs. Romania has all the operational programmes adopted by the European Commission. Romania has a green light from the European Commission and has a chance, through measures of fiscal relaunching, to develop,” said the ad-interim PSD chairperson.

Rovana Plumb added that the Law on the wages of public employees is in jeopardy if the Tax Code is not adopted and applied in its current form.

“The new wage law is in dialogue with the unions and until Monday we expect from our social partners viewpoints so that it is a fair law, that will introduce equity to the budgetary sector. It is a law to motivate personnel and to determine specialists to come to the system. Until late August the law will be drafted and we want it in Parliament until September for it to be adopted. The form in which the Tax Code is adopted influences the gradual implementation of this law for two years. The wage law is in danger if the Tax Code is not adopted and applied. We are speaking of 1.18 million people in the public sector,” Rovana Plumb said.

 

“PNL is performing the biggest political farce; Predoiu takes over Basescu’s teachings”

 

“The National Liberal Party (PNL) is performing the biggest political farce and Catalin Predoiu is taking over the teachings of Traian Basescu”,  the ad-interim chairperson of the Social Democrat Party (PSD), Rovana Plumb, continued.

In a press conference, the PSD leader criticized the decision of President Klaus Iohannis to resend the Tax Code to Parliament and branded PNL a “disappointment”.

“Nine in ten Romanians said that the measure to reduce the VAT from 24 pct to 19 pct is the best measure of the last ten years, according to a poll by CSCI. It is regrettable that this Code was not promulgated and the double game played by PNL is embarrassing. After supporting these measures fully, in Parliament, today the PNL is the biggest political farce since the cutting of the salaries. Catalin Predoiu wants to take over the teachings of Traian Basescu. In 2009, Basescu said that we have not had a crisis and then he slashed the salaries and pensions. For half a year, the PNL spoke of supporting the measures of the Tax Code. Suddenly it disagrees. The ridiculousness is endless. PNL says it will do as President Iohannis wants. The big disappointment is PNL because instead of supporting the promulgation of laws, made pressures so it is not adopted,” said Rovana Plumb.

She added that President Klaus Iohannis brought no serious economic arguments to justify resending the Tax Code Law to Parliament.

“We have a budget surplus, an increase in collections, an increase in investment. If we do not take advantage, it will be an error we will regret. The EU deficit limit, according to the treaties, is 3 percent. We are the member state, together with Germany, that maintains itself within this ratio. Under Basescu’s term in office, the deficit level between 5 and 7 percent. We hear lessons on the budget, but let’s remember that the Ponta Government, together with the coalition, has adopted sustainable and high financial stability budgets. We do not take lessons from those who want back in power the apostles of cutting pensions and wages but also raising taxes. We expect responsibility from the PNL, they discussed with us, they voted and they supported the Tax Code”, Rovana Plumb mentioned.

 

 Orban: PNL continues to support the Tax Code; we understand President’s worries

 

Floor leader of the National Liberal Party (PNL) in the Chamber of Deputies Ludovic Orban told Agerpres on Friday that PNL continues to support the Tax Code, but they also understand President Klaus Iohannis’ worries over the document.

“PNL cannot be but consistent with his decisions in time,” said Orban, adding that PNL voted against the rise in the Value Added Tax (VAT) in 2010 from 19 per cent to 24 per cent and introduced in their governing programme VAT cuts to 19 per cent as of January 1, 2016 and to 16 per cent as of January 1, 2018.

He also mentioned PNL voting against an additional fuel excise duty and tax on special structures.

He added that some amendments to the Tax Code originated with PNL.

“Consequently, PNL cannot but continue support for the Tax Code. I understand the worries of the President over the Government’s lack of seriousness and its inability when looking at this Tax Code to fit the related measures in the tax and budget objectives set in accordance with the fiscal and budgetary strategy and the convergence programme, but I do not believe Romanians, the business environment and all the market operators should be penalised for the Government’s incompetence. For its economic recovery, Romania needs to adjust the Tax Code. It certainly no longer needs the Ponta Cabinet,” said Orban.

 

PSD’s Firea: Liberals’ backtracking on Tax Code shows party lacking direction

 

The Social Democrats’ (PSD) spokesperson Gabriela Firea said on Friday that the Liberals’ “backtracking” on the Tax Code shows the National Liberal Party (PNL) has no direction and no vision of the interests of Romania.

“Romania needs these Codes in order to get the general VAT back to 19 percent and also in order to put forward other measures in favour of the economy. The Liberals’ backtracking, by which they seem to have influenced the president as well, shows a party lacking direction and mostly lacking a vision regarding the interests of Romania. This type of cowardice is characteristic of those who had decided to cut salaries and benefits, close hospitals, tax low pensions, instead of promoting stimulus measures for the economy and cutting the cronies’ money” says a release sent by Firea to Agerpres.

She cautions that the programme unveiled by Liberal first deputy chairman Catalin Predoiu contained measures such as those promoted by the Government and voted in Parliament. “From the position the Liberals have now, we understand their programme is but a string of lies”, the Social Democrat official stressed.

 

FinMin Teodorovici: Resending of Tax Code to Parliament delays preparations for 2016 budget

 

Resending the Tax Code to Parliament delays, somewhat, the preparation of the 2016 budget, and the invoked measures are unjustified, said, on Friday, in a press conference, the Minister of Public Finance, Eugen Teodorovici.

“The fact that this Tax Code was returned to Parliament delays, somewhat, the preparation of the budget for 2016. We have announced for a long time, since August, that we intend to start this process, so that Romania has a draft budget sent on time to Parliament, respecting all our obligations. I am convinced that there are many companies that are questioning the way in which they can think out a business plan for 2016. And, not least, with this decision, from my point of view, a breach was created in what regards Romania’s position in relation with those in the European Commission. Romania is today in maybe its best position in years, having a clear political consensus in what regards the reform plans in economy: both the Government, as well as Parliament, nearly in unanimity, voted on the Tax Code, and with a decision in the same sense from the President we would’ve had a firmer position in regards to Romania’s conviction on its economic growth path,” the Finance Minister emphasized.

In Teodorovici’s opinion, the motives invoked, the 1.2 pct deficit and other possible macro-economic imbalances are unjustified.

He mentioned as well that there are member-states that have gone far above the 3 pct deficit set in the Maastricht treaty, “deficit that Romania really has to have in view”.

“I have always said that this 3 pct deficit will be a target that Romania will not exceed in 2016. On the contrary, actually, the way in which the budget for 2016 is to be built is such that the deficit goes down even further from what Romania, unfortunately, assumed in the past”, said Eugen Teodorovici.

 

ALDE: Iohannis’ decision is wrong; we will find quick solutions to rediscuss in Parliament Tax Code

 

Alliance of Liberals and Democrats (ALDE) co-chairmen Calin Popescu-Tariceanu and Daniel Constantin believe that the decision of President Klaus Iohannis to reject the new Tax Code is “wrong” and “biased” and was dictated by party interest coming from the National Liberal Party (PNL).

The two express their belief that, together with their governing partners, they will find quick solutions, including an extraordinary session of Parliament to rediscuss the normative act.

“ALDE takes notice of the wrong and biased decision of President Iohannis. At the same time, we express the conviction that together with our governing partners we will find quick solutions to pass through Parliament as fast as possible the Tax Code again, without substantial modifications, including through an extraordinary session of Parliament. ALDE assures the business environment that the current governing coalition keeps untainted its promise that Romania will have a new Tax Code”, an ALDE release remitted on Friday to AGERPRES shows.

According to the quoted source, the head of state was posed with a simple choice with regards to the promulgation of the Tax Code: “Take into account the interest of Romanians, which would have been the beneficiaries of tax and tarrifs reduction, or take into account party interests, of the PNL; to listen to the requests of the business environment which supports the new Tax Code or to listen to the requests of Catalin Predoiu, of Gh. Ialomiteanu or Vasile Blaga – politicians who want to get in power as soon as possible and at all costs.”

“The President chose poorly: party interests, before interests of people. Klaus Iohannis’ decision is purely political, with no economic arguments. The arguments invoked are in form only, in order to explain a decision taken only because of political considerations and for one party solely, the PNL,” the release shows.

According to the ALDE co-chairmen, “the maximum irony is that ‘my party’ and ‘my government’ represent for Klaus Iohannis and for Traian Basescu the same thing: PDL [Democratic Liberal Party] (the new PNL being, in fact, the old PDL), Blaga, Predoiu, Anastase.”

“In his speech delivered a few days ago, President Klaus Iohannis stated: ‘we must understand the distance between political temptation and economic reality.’ Klaus Iohannis bent to political temptation and ignored the economic reality. (…) We are in an unique context of opportunity to put into application an ultra-liberal Tax Code that will secure economic growth and will accelerate the positive effects for the population. More so, all the economic measures that have paved the way for the new Tax Code – from the CAS (social security) reduction by 5 pp to the VAT slashes for food – have proven that Romanian economy is prepared and is positively reacting to such fiscal stimuli,” the ALDE release shows.

 

BNR’s Vasilescu: Fiscal Council’s position on Tax Code should be considered

 

The position of the Romanian Fiscal Council on the topic of the Tax Code – which state that the latter triggers permanent and significant deviations from the objectives included in the European treaties – is categorical and must be taken into account, Adrian Vasilescu, Strategy Consultant at the National Bank of Romania (BNR) told Digi24 television broadcaster on Friday.

“The answers of the Fiscal Council [towards the Tax Code] are very categorical and trigger irreversible and significant deviations from the objectives deriving from European treaties, as well as from the national legislation. This statement by the Fiscal Council [included] in the report addressed to the President is very categorical and cannot be overlooked. Before that, however, the Fiscal Council expressed a widely spread opinion and likely nobody took it into account. I believe that, as the President did not promulgate the Tax Code, it will be sent back to Parliament and Parliament needs to set the steps to be followed from now on. I believe that carefully listening to the Fiscal Council is one of the steps”, Vasilescu said.

 

CF’s Dumitru: Fiscal unburdening, a good thing; it should be seen if possible under current budgetary circumstances

 

Fiscal unburdening is a good thing, nobody denies it, but we have to see if that is possible under the current budgetary circumstances, Chairman of the Fiscal Council (CF) Ionut Dumitru told Digi24 private television broadcaster on Friday.

‘I do not think public discourse should raise the question whether or not fiscal unburdening is wanted. If we take a poll right now, we will see that everybody wants fiscal unburdening. Fiscal unburdening is a good thing and nobody can deny it, but we can put up for debate whether or not we can do it under the current budgetary circumstances. If we look only at the Government’s revenue we are making a big mistake, because the spending side should also be considered,’ said Dumitru.

He added that the intention to cut the Value-Added Tax (VAT) from 24 to 19 per cent is ‘aggressive,’ but the measures to repeal tax on special structures and fuel excise duties are good initiatives.

‘If we consider the discussions of late we can see a very aggressive VAT cut is being considered. I say the other measures, such as repealing the tax on special structures, which was economic non-sense from the very beginning and the repealing of fuel excise duties, are good, and I want to say that the fuel duties were designed to be used for new infrastructure, which I have not seen any. So, we are reducing the VAT very aggressively, with the cut being not just 5 percentage points, but higher, because the reduced VAT has been extended to more products, so the average VAT is currently down to somewhere at 15 per cent. Before the cut, there was a flat 24-per-cent VAT, an actual tax on the consumption basket of 22 plus per cent. From 22 per cent and some we go down to 14 per cent and some, which is an 8-percentage-point cut. Show me one country in the world where an 8-percentage-point cut so quick generates no problems,’ said Dumitru, according to Agerpres.

 

 

 

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