Reactions to the proposed Fiscal Code revision

The Romanian Finance Ministers announcement regarding major changes to the Fiscal Code as of 2019 has triggered a chain of reactions.

Roxana Vasile, 20.12.2018, 13:10

The announcement made on Tuesday by the Romanian Finance Minister Eugen Teodorovici, that the Government is planning to bring major changes to the Fiscal Code starting 2019, changes that are to be adopted through an emergency decree before the end of 2018 has had the effect of an earthquake. Among the new provisions is a cap on natural gas prices for a three-year period, a 3% tax on turnover and a tax on banking assets seeking to cap the interbank ROBOR interest rates at a reference level of 1.50 percent.

Minister Teodorovici: “Both partners must win: the financer, which is the bank and the one that gets the financing. On the one hand, there are the companies in Romania, which unfortunately pay higher costs as compared with other companies from other countries, given that the country risk is invoked in their case. Then there are also the natural persons.”

Reactions to the finance minister’s announcement have started pouring soon after. First, there is a group that supports Minister Teodorovici’s measures and part of it is the Alliance of Liberals and Democrats (ALDE), a junior partner in the ruling coalition. Its leader, Calin Popescu Tariceanu, has said that the banks in Romania must invest the money they receive from the citizens in the economy of the host-country, something that they do not do at present. Moreover, the ALDE leader went on to say, banks prefer to invest their money in government bonds, that are also financed by the state, which means it is money collected from the taxes paid by the citizens.

Then there is the group that opposes the new fiscal measures, that includes President Klaus Iohannis, the right-of-center parliamentary parties and the business environment, whose opinion is that these measures will create chaos in economy. While the Romanian Energy Regulatory Authority says the measures to be taken through an emergency decree will not trigger an increase in the price of energy and gas for household consumers in the upcoming period, the head of state, Klaus Iohannis, contradicts it.

Klaus Iohannis: “The over-taxation of companies in the energy sector is intended. The only result that we can anticipate is that we will all have to pay more for electricity and gas. Decision makers in the telecommunication field have said this measure will surely affect them too, which means we will have to pay more for telephony and Internet. And this is only the beginning, because all companies use electricity, fuel and telecommunications, so, in short, everything will be more expensive.”

From banks to big energy and IT&C companies and from associations of Romanian and foreign investors to economic analysts, all have warned that these additional taxes will affect companies and will be ultimately paid by the citizens. The first signal in this respect came from the Bucharest Stock Exchange, whose main index on Wednesday saw the biggest fall since the economic crisis of 2008.