The Romanian Government Proposes Economy-Boosting Measures

A set of five such measures has been drafted and will be discussed with the joint mission of the IMF, the European Commission and the World Bank, expected to arrive in Bucharest on July 31.

The visit was originally scheduled for July 24, but the international institutions chose to stay out of Bucharest during the referendum campaign.

The Ponta Government wants those companies that employ jobless people under 25 or over 55 years of age, keeping them on their payroll for at least 2 years, to be exempt from paying one year’s worth of pension, unemployment and healthcare contributions.

Secondly, the government plans to allow companies with a turnover below 500 thousand euros to pay their VAT only upon receipt of invoiced amounts, on condition that refunds are made through banks.

According to the government, this measure, insistently requested by business operators, will have a direct positive influence on over 90% of the country’s active companies, with SMEs set to benefit the most.

Here is Liviu Voinea, State Secretary with the Finance Ministry:

“This is an incentive that the government will offer to all small and medium-sized companies. At present, VAT refunds may be done without proof that the VAT has actually been paid. This new procedure will virtually eliminate illegal VAT refunds, because it will require proof of VAT payment in the first place.”

The measure is hoped to curb tax evasion, a problem that past and present governments have been combating, with no significant success.

Another measure is to raise the deductibility ceiling for research and development expenses from 20 to 50%.

This is expected to encourage innovative investments and create jobs in high value-added industries.

On the other hand, the Government tried to help struggling companies by writing off the penalties for those companies that pay their debts to state-owned lenders between September the 1 and December 31, 2012.

Finally, the fifth measure considered by the Government targets NGOs and foundations, which are generally exempt from VAT payment.

The Government undertakes to change the relevant legislation and bring it in line with European regulations, so as to simplify the participation of Romanian NGOs in EU-financed projects.

All these measures will be analyzed together with the IMF mission, and, if found not to affect budget stability, they stand good chances of being enforced.