Tax on greed on bank assets as of 1 January to be put forward by Gov’t, with rd 3 bl lei impact
The government puts forward as of 1 January 2019 a duty called “tax on greed” on the financial-banking institutions, in case the 3-month and 6-month interbank offered rate ROBOR, which serves as benchmark for floating-rate loans in lei go over a certain value, the impact of such measure being able to reach 3 billion lei (rd 645 million euro, ed. n.), on Tuesday announced at the Victoria Palace, the Pubic Finance Minister Eugen Teodorovici.
“It is proposed that a duty be applied as of 1 January on the financial and banking institutions’ assets, called the tax on greed, because it is the best expression for what is today happening in Romania, and it will be levied on the institutions if the 3-month and 6-month interbank offered rate ROBOR exceed a certain percentage value. The tax is established based on the quarterly average of the 3-month and 6-month offered rates ROBOR when the 1.5pct value is exceeded. This is the threshold below which such a duty does not apply,” Teodorovici explained, adding that the impact of such a measure could amount to about 3 billion lei or could be zero, should the banks decide to maintain the ROBOR at the 1.5pct reference ceiling.
Central bank’s reaction
The level of the interbank offered rate ROBOR, which serves as benchmark for floating-rate loans in lei, is attributable to the entire country, it depends on the domestic realities and first of all on the inflation rate, therefore one cannot say that the banks are greedy because they increase this index due to certain disorders of the economic system, on Tuesday night said for the private Digi 24 broadcaster, Adrian Vasilescu, strategy consultant with the National Bank of Romania (BNR).
“The ROBOR level is attributable to the entire country. The ROBOR is the average interest rate at which Romanian banks borrow among them. (…) And yet I don’t understand the tax on greed. I believe that a quite deeper philosophical thinking is needed here, because I don’t know whose greed it is. The banks, if they were to set the ROBOR by themselves, the state could say something like this: you’ve set a very high ROBOR for yourself, you, this bank, and there, you are greedy, and for such greed I, as the state, am entitled by Constitution and the laws of my country to tax you. But things are not like this. The ROBOR interbank offered rate is set on account of certain country realities and first of all on the inflation rate. When the inflation has been for two years and a half at very low levels, one year and a half it was even below the average inflation, meaning below zero, all of that period the ROBOR interbank offered rate was zero and something. When the inflation rate began to climb, in October last year and it only climbed for one reason: the shock created by certain regulation authorities that have increased one by one and periodically for several times, from October last year until this year’s summer, the electric power, the thermal energy, the natural gas, products whose price hikes are reflected in the whole picture of the prices.(…) All these father inflation and the ROBOR inflates too, because the ROBOR is an interest rate and in one country’s economy there are two Siamese sisters: the interest rate and inflation,” Vasilescu explained.
In his opinion, the state should say that it taxes the banks because inflation is high and the ROBOR is climbing, but then again he adds that the state has the right by Constitution to apply taxes, given that Romania has the lowest quantum of revenues to the budget relative to the gross domestic product (GDP), however, everything must be carried out in a transparent way.
CDR calls on Gov’t not to adopt avalanche of fiscal-budgetary measures, deemed unacceptable
The avalanche of fiscal-budgetary measures announced a few days before the end of the year and with a significant impact on the entire economy is unacceptable, while being a symptom of a fracture between the government and the economic operators, the representatives of the Coalition for Romania’s Development (CDR) consider.
The CDR calls on the Romanian Government not to adopt this Emergency Ordinance and to allow for an ample space for public debate.
“The rumors that have circulated in the last week were confirmed by the announcement of the Ministry of Public Finance, in the press conference held by Minister Eugen Teodorovici and by the publication of the proposals on the ministry’s website. The business environment was presented 57 pages of substantial modifications, having only one day to study and understand them, all in the context in which only in 2018 the Fiscal Code has undergone over 200 modifications,” CDR says in a press release issued on Wednesday.
CDR expresses its deep concern that over recent days the market has been flooded with these rumors of taxes that will be imposed on companies at the last minute and will be approved at this year’s last government sitting. These measures refer to the tax on greed applied to financial-banking institutions, the decrease of the administration fee for the Pension Pillar II, the transfer by state companies of 35 percent of the amounts that were not invested, the capping of gas prices from domestic production and others.
“Instead of destabilizing the economy through overnight measures, we encourage the government to collect the owed taxes and duties, as the budget balancing measure,” the CDR representatives said.
CDR is a private, apolitical initiative, built as a collaborative agreement through the collective participation of its members, and brings together 45 organizations and associate members. CDR members volunteer with the resources and expertise needed to formulate common views on public policies that impact on the business environment. The companies represented by the 25 CDR member organizations employ more than one million people and generate about 50 percent of the GDP.
PNL: “Greed” of PSD Government destroys economy
National Liberal Party (PNL) spokesperson Ionel Danca, says that the “greed” of the Social Democratic party (PSD) Government destroys the most important sectors of the economy.
“The hunger for money in the state budget and the greed of the Dragnea [PSD leader, ed.n.] – Dancila [Romania’s Prime Minister, ed.n.] Government for revenues from the taxes paid by the companies have clouded their judgment and are destroying the most important sectors of the Romanian economy. The wild over-taxation of companies in energy, communications, banks and commerce will turn against the Romanians who, through their honest work, support the functioning of the state,” Danca said, according to a press release issued on Tuesday for AGERPRES.
“The incompetence of the Dragnea – Dancila Government cannot be covered by measures that dynamite the proper functioning of the market economy. Additional costs imposed by these unprecedented tax measures will be passed on to consumers by higher utilities prices, higher bank instalments and a new explosion of the inflation,” the Liberal explained.
He added that, according to the announcement made by Finance Minister Eugen Teodorovici, a tough reaction of domestic and foreign investors is to be expected which will downgrade the outlook for economic growth.
President Iohannis on ordinance announced by FinMin Teodorovici: It pushes economy into chaos
President Klaus Iohannis said on Wednesday that the emergency ordinance announced by Finance Minister Eugen Teodorovici, “introducing new taxes and duties”, comes with “unheard of” ideas and “pushes the economy into chaos.”
He believes this matter is “very serious and very concerning.”
“We were all taken by surprise, by the fact that the Government is preparing an emergency ordinance to introduce new taxes and duties. This reminds me of a statement Mrs. Prime Minister made in her speech after the Government was approved in Parliament, the inaugural speech that it. And Mrs. Prime Minister was saying at the time: ‘Keep in mind this, we won’t introduce new taxes and duties.’ And here she is, one year later, introducing new taxes and duties. This emergency ordinance wasn’t discussed with the partners of the economic environment and not even of the institutions of the state. This project has no analysis behind it and it comes with ideas that are unheard of before, it throws the economy into chaos. For the Ordinance introduces an overtaxation of companies in the energy field. The only result that we can guess is that we will all pay more for electricity and gas. (…) At the same time, we were assured by those in charge in the telecommunications field that this matter will also affect them and, definitely, we will be paying more for telephony, Internet and so on. This is only the beginning,” said Iohannis, at the Cotroceni Palace, at the end of the CSAT (Supreme Council for National Defence) meeting.
The head of state called on the Government to “change its mind regarding this ordinance,” while arguing that all companies will be affected.
“In short, we expect every price to increase, this will be the effect of this Ordinance. For there are countless modifications that it brings, changes and last minute adjustments, without consultation, without a transparent debate and without an analysis existing behind these measures. This is a new concept being introduced – the tax on greed. Because of the Social Democrats’ greed to take more money that they will manage as they please. These things will be throwing the entire economy into chaos and, worse than that, they are going to completely mess with the Romanians’ budgets, because, after all, such bad measures, brought up in the last minute, will be supported and paid by the average people. This must not happen and I urge the Government to change its mind in terms of this ordinance, to put it up for debate, to negotiate it with the employers’ associations, with the trade unions and, after a serious and substantial analysis and discussions, to propose a new version of it, more sustainable,” the President stated.