Special Parliament Session over Fiscal Code

The Parliament of Romania is to convene in a special session between August the 24th and 26th, to re-analyse the Fiscal Code bill, as requested by President Klaus Iohannis. On July the 17th, the head of state dismissed the bill and sent it back to Parliament for further analysis, on grounds that its enforcement may give rise to severe economic imbalances.

Liviu Dragnea, the interim president of the Social Democratic Party, the main party in the ruling coalition, said that, although so far there are no reasons to make alterations to the bill, he is still concerned with the statements made recently by the governor of the National Bank of Romania, Mugur Isarescu. This is why, Dragnea explained, until the special Parliament session the Finance Ministry will analyse once again the impact that the tax cuts will have on the state budget. According to Dragnea, this analysis should convince both the Presidency and the central bank that the fiscal relaxation measures are sustainable.

Liviu Dragnea: "The Finance Ministry will carry out a new analysis and will also make a forecast for the coming two or three years, which will perhaps prove a lot clearer the sustainability and suitability of the measures laid down in the draft Fiscal Code, which is actually very well received both by the general public and by the business community."

The Liberal Opposition however wants a technical evaluation of the draft Code, before the new vote in Parliament. The co-president of the Liberal Party Alina Gorghiu says the Liberals will endorse the Code in a form that would support the fiscal relaxation measures. Alina Gorghiu:

"The Liberal Party has never considered voting against this Fiscal Code. The review that we propose includes an analysis of the technical elements. And if, by the end of August, we reach the desired conclusions and the figures are in favour of the fiscal relaxation measures, then we will obviously endorse the text, irrespective of the amendments that may be made."

One of the most controversial measures is the slashing of the VAT from 24 to 19% as of next year.

Mugur Isarescu has warned that, because of the impact they would have on the Gross Domestic Product, the main fiscal relaxation measures, such as the reduction of the VAT and the social security contributions planned for next year or the scrapping of other taxes that bring substantial revenues to the state budget, are simply inapplicable, in economic and financial terms.

According to Isarescu, if the draft Code takes effect in its current form, this would entail a 2.3% drop in the GDP.

The head of the central bank also warned that these tax cuts should be applied gradually, so as not to jeopardise Romania's economic and financial progress.

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