Final decision on income from dividends

The uproar of recent days concerning the raising of tax to 10% for income in the form of dividends paid out as of 2005 subsided on Tuesday after the head of the Senate’s budget-finance commission, Varujan Vosganian, confirmed that the ruling parties will give parliamentary support to the government’s decision in respect of the level of tax.

Only hours before making his statement, Vosganian was still expressing his support for maintaining the level at 5% for dividends from profits made in 2004. In telephone calls to the prime minister and the finance minister, however, the two officials insisted that the 10% level be applied.

This led to the issuing of a new statement: “Given that the government is in talks with the IMF – and it is very important that the government has a credible platform in these talks – and given that budgetary expenses will be appear in addition to those contained in the draft budget approved in 2004, we have agreed that in the Senate budget-finances commission the representatives of the PNL-PD Alliance, UDMR and PUR should support the government’s position as included in the modifications made to the Fiscal Code,” said Vosganian.

“There is some reason for discontent because the road from gross profits to dividends is now 3.75% more expensive, given that profits in 2004 are taxed at 25% and dividends at 10%. This is no surprise, however, because the modification was published as early as August 2004 in Ordinance 83 modifying the Fiscal Code. At that time, the reaction of the business environment was weak. Now, everybody has come to realize that they need to pay more and suddenly there was uproar,” said Gabriel Biris, a lawyer with Salans specialised in fiscal legislation.