Fiscal Code chaos brought to an end by fourth emergency ordinance

The law modifying the Fiscal Code was published in the Official Gazette last night after President Traian Basescu faxed his signature of the decree implementing the draft law from Tokyo.

As stipulated under the Constitution, the law will come into force three days after its publication, meaning the first working day on which the new provisions will be applied is Monday, June 6.

The modified Fiscal Code will come into force next Monday – that is, on June 6, not June 1 – said the presidential advisor, Renate Weber, who coordinates the constitutional and legislative department of the President”s office.

The presidential decree to implement the law endorsing the new provision of the Fiscal Code was faxed hurriedly to Tokyo to enable the President to sign it during his visit to Japan. It took even less time to have it published in the Official Gazette.

As a consequence, June 6 should mark the end of the period of chaos surrounding the fiscal legislation caused by the incessant fumbling of the Finance Ministry and, implicitly, the prolonged debate by Parliament on the emergency ordinance which stopped President Traian Basescu from implementing the law in time that it come into force on June 1. With the law still not brought in force, Emergency Ordinance 24/2005 as modified by Emergency Ordinance 30/2005 was still in force as of yesterday.

After finally responding to the continued complaints of the business community and experts over the last few days, Finance Minister Ionut Popescu yesterday hurriedly devised a new emergency ordinance to abrogate the articles in EO 24/2005, which were scheduled to come into force on June 1, 2005.

The purpose of this was to keep the calculation of tax on gains made from real estate transactions, stock transactions and interest rates the same until the Fiscal Code in the form enacted by the Parliament comes into force.

In fact, without offering any official explanation, Popescu instructed bankers on Tuesday night to not go ahead with deducting the 10% of interest on gains from interest rates as the legal requirements would have called for. Brokers from the National Association of Securities Firms received similar instructions.

Had he suggested that the prime minister enact the ordinance sooner, he would not have been found running back and forth yesterday, from his ministry to the Government, in order get the normative act enacted as soon as possible and forwarded to the Official Gazette for publication on June 1.

This is the fourth emergency ordinance in six months issued by the Tariceanu Cabinet with a view to modifying the fiscal legislation.

In the absence of this new, almost retroactive ordinance, things have come to a point where, absurdly, certain rules of taxation will be in operation for only a few days, only to be replaced by a completely new set of rules. Yesterday, for example, the tax on gains from transactions with shares acquired before June 1 2005 and sold within less than 365 days from this date was supposed to be calculated on a pro rata temporis basis, with a 1% tax rate applying until June 1 2005 and a 10% rate thereafter.