Final draft for the fiscal code

The new draft fiscal codes have stirred a huge public interest, but also fierce contradictory debates.

Florentin Căpitănescu, 31.03.2015, 13:45

The new draft Fiscal and Fiscal Procedure Codes, adopted by the Romanian Government last week, are now being debated by the Senate’s Budget Committee, under an emergency procedure. On Monday, however, the Fiscal Council, an independent body whose responsibility is to make recommendations regarding the long term fiscal and budgetary discipline, rejected many of the amendments brought to the two codes. The Council believes that the government’s initiative to rewrite the codes was both justified and welcome, but the due and tax reductions provided by the new bills are unsustainable.

According to the council, because of the new fiscal cuts, the budget targets will be exceeded, so in 2019 the deficit would be as big as in 2010, when the economic crisis was in full swing. Also, the Fiscal Council said that the government had overestimated the positive effects that such a fiscal relaxation would have on economic growth. The moment chosen for such measures is not right either, because, the council says, putting too much pressure on economic growth, as it happens in Romania today, might trigger a new phase of recession, therefore fresh austerity measures.

The Fiscal Council’s recommendations, which do not favour the amendments to the fiscal codes, have been harshly criticized by Prime Minister Victor Ponta, who has been keen on stressing that the responsibility for the new legislation in the field lies with his cabinet. The Prime Minister has questioned the accuracy of the council’s conclusions, saying that the political motivation of its members, appointed in 2010, replaced professional objectivity. Prime Minister Victor Ponta:

“As far as I know, the council’s recommendations were not favorable also when we cut the VAT on bread and when we decided to reduce employers’ contributions to the Social Security Fund.”

The Romanian Government estimates that with the new provisions regarding the drop in the contributions to the social security fund, the cut of the flat tax rate, of the VAT and of excise duties, the new Fiscal Code will trigger economic growth. In turn, the liberal opposition has announced it will file amendments during the parliamentary debates. As to the areas targeted by such amendments, the former finance minister Gheorghe Ialomiteanu gave some details:

“We do not agree to the increase in local taxes and dues, and some fiscal relaxation measures should be implemented right now, because the business environment needs to benefit from lower taxes and dues now. Also, the provisions regarding lower employment taxes should be enforced as soon as possible because the major problem that Romanians are faced with is to find a job, now, not in 2017 or 2020.”

The two fiscal bills were also under public debate for a month.