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February 3, 2023

Fiscal Code, the code of discord

MPs will return from their holidays a week earlier. They were summoned for an extraordinary session on August 24-26, in order to discuss the President’s request to have the Fiscal Code re-examined, a law that seems to create for and against camps, camps whose configuration changes by the day.

The Head of State sent the draft law back to Parliament, arguing that Romania cannot afford so many tax cuts at this moment. The Premier counter-attacked and reminded Klaus Iohannis that he had agreed with the hiking of child benefits without raising the issue of the sources of financing. At the same time, the Fiscal Code generated a dispute between the National Bank of Romania (BNR) Governor and the Premier. The Prime Minister is irritated with the fact that Mugur Isarescu publicly criticized the fiscal relaxation measures despite the fact that, the Premier claims, he allegedly had a different point of view before the draft law was adopted in Parliament. On Monday evening, BNR’s spokesperson nuanced the Governor’s position on Digi24. And the Finance Minister stated, also on Digi24, that the Liberals assured him that they will vote the Code in its unmodified form.

“The ideal thing would have been to have talks with those that had negative opinions and for them to present them before,” Victor Ponta said. Asked whether the BNR Governor told him that he disagrees with the Code, Victor Ponta answered: “No, of course not, you think he told me secretly? No, nobody said the Code is not good, everyone agreed, then they changed their mind,” the Premier complained.

At the end of last week, after BNR informed that it will not intervene in the conflict over the Fiscal Code, Mugur Isarescu presented his objections.

“That package of tax cuts is, economically and financially, inapplicable. You don’t cut and then measure. Do we cut taxes and then start to see whether we can cut other expenditures?” Governor Mugur Isarescu stated.

On Monday, the BNR spokesperson nuanced the Governor’s statements on Digi24.

“Certain confusion is created, that all the talk is in terms of for or against the Fiscal Code. I want to tell you that Governor Isarescu never stated explicitly, not even implicitly, that he disagrees with the Fiscal Code. That does not appear in any of his statements. What appears is a discussion about the timeliness of all measures, the six fiscal relaxation measures, at the size at which they are introduced in the Fiscal Code,” Dan Suciu said.

“I don’t know how the idea that this Fiscal Code would revolutionize Romania’s finances through the simple reduction of some taxes has slipped in,” the President said at the time.

The Head of State in fact claimed that it is not timely for the VAT to be lowered to 19 per cent.

The Fiscal Code was adopted by Parliament uneventfully at the end of June.

Now the parties have to reposition themselves when voting on this draft. PSD has already announced that it will support the draft in the form in which it was initially adopted by Parliament, so that there are significant chances it will end up back on the President’s desk unchanged.

“We have no element that would make us change our opinion, in the following period the Finance Ministry will run another analysis on the sustainability of the measures, but with nothing new having happened there is nothing new that would change our opinion,” PSD Interim President Liviu Dragnea stated.

The opposition however is showing signs that it may change its vote and proposes a debate on the Fiscal Code issue.

“The issue of voting against the Fiscal Code was not raised, questions were raised by the Fiscal Council, the BNR, the Presidency, we believe that an analysis has to be made before the vote,” PNL Co-President Alina Gorghiu said.

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