Romania’s political leaders reach agreement on tax cuts
Romania’s main political party leaders reached an agreement on the tax cuts to be included in the new Fiscal Code, following a meeting on Thursday, August 27. They agreed to a gradual VAT rate cut, from 24% to 20% starting January 2016, and from 20% to 19% starting January 2017, according to Liviu Dragnea, the president of the ruling Social Democratic Party (PSD).
They also agreed to postpone removing the extra excise on fuel, in order to keep the budget deficit under 2% next year.
The political agreement reflects the measures announced after the technical debate on the Fiscal Code that the representatives of the main political parties had a week before.
The Social Democratic Party (PSD), National Union for Romania’s Progress (UNPS), Liberal Democrat Alliance (ALDE), which support the Government led by Prime Minister Victor Ponta, and the National liberal Party (PNL) and Magyar Democratic Union (UDMR) were represented at this meeting.
The main objective was to get a political consensus from the major political parties to support the new fiscal measures and keep them in case the Government changes.
Victor Ponta’s Government announced an ample fiscal relaxation program at the beginning of this year, which included major tax cuts in the years to come. However, many of these tax cuts were removed following discussions in the Parliament, as they would have generated budgetary imbalances.
The main measure that was kept was the VAT rate cut from 24% to 19%, starting January 1, 2016. The Government already cut the VAT rate on food from 24% to 9% on June 1. The Fiscal Code’s initial form also removed the extra excise on fuel and the tax on special buildings starting January 2016.
The Parliament approved the new Fiscal Code at the end of June, with a large majority. However, President Klaus Iohannis sent the law back for review asking the Parliament to further temper the tax cuts. Romania’s National Bank (BNR) and the International Monetary Fund (IMF) also said that the planned tax cuts were too high.
The reviewed Fiscal Code will be discussed by the Parliament at the beginning of September (next week).
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editor@romania-insider.com
