Finance minister Mihai Tanasescu making fiscal forecasts

The profit tax cut to at least 23%, the introduction of the flat salary tax set at the same level, the significant increase in the dividend tax and social security contribution cut to about 45% of the gross salary. All of them are the main targets included in the 2004-2007 fiscal strategy draft on which the Finance Ministry is now working.

“The work force taxation for both employer and employee will come to 49% of the gross salary in 2004 and go down to 42%-45% by 2005-2006. We also target a profit tax cut from 25% at the moment to 20%, while the dividend tax will increase accordingly,” Finance minister Mihai Tanasescu on Monday said.

He brought up again the prospect of the flat tax on salary-related incomes, the introduction of which was postponed for 2005. This will in no way entail dropping the procedure to file tax returns in line with the current structure of the global income tax.

“We are trying to convince people this flat tax is a new way to stimulate work and make the fiscal system simpler. The important thing is for us to have a predictable policy that allows business people to devise business plans against these fiscal projections,” the Finance minister said.

Still, how predictable can a fiscal policy be, which, as things stand now, will promote a fiscal deduction system valid for only one year?

All this because the political decision to postpone the introduction of the flat tax has put the Exchequer in the position of having to come up with innovations again: accept the deductibility of the expenses made for insurance premiums, of the pension contributions, of the interests on housing loans, on home improvement and then… a complete mystery.

The year 2005 should see the flat tax eventually introduced, but this hardly blends with the very generous deduction system currently in force.

The only predictable thing therefore is the prospect of “changes made to modifications.”
razvan.voican@zf.ro