Flat tax project still shrouded in mystery

Finance minister Mihai Tanasescu is not giving up on the flat tax, but cannot say exactly when this measure is going to be enforced. At the same time, PSD (Social Democrat Party) officials are saying the project may be shelved until 2005, which only feeds the uncertainty surrounding it.

“The decision to introduce the flat tax will be made following consultations. It is also up to Parliament’s reaction. The climax will happen there,” Finance minister Mihai Tanasescu said yesterday, after a meeting with officials of the Romanian Businesspersons Association (AOAR).

Just before Tanasescu met with the AOAR representatives, the PSD Permanent Delegation, the ruling party’s leading core, discussed the possibility that the introduction of the flat tax should wait another year.

“PSD has tackled two options. Either the flat tax will be introduced on January 1, 2004 or this system will be applied as of January 1, 2005, in case the Finance Ministry cannot enforce this system immediately. You should bear in mind that the flat tax is not being abandoned, we are just discussing the timing of its enforcement,” said PSD spokesperson Bogdan Niculescu-Duvaz. According to Duvaz, the decision will be made next week. In case the Government postpones the introduction of the flat tax, the costs of social taxes will be eased next year, the ruling party’s spokesperson said. Inquired whether the proposed 23% flat tax will still stand, Duvaz argued: “This is nothing more than a proposal. Nothing was nailed down.”

And thus the flat tax project has been surrounded by even more mystery.

The Government is expecting the results of a poll to be delivered by polling institute IMAS, in order to find out the people’s opinion on flat tax. The Finance minister yesterday mentioned the possibility of accepting certain so-called economic deductions (besides the basic deductions), such as expenses related to life insurance premiums and contributions to the private pension funds.

This possibility has been ruled out so far, but pressures exerted by certain interests have prompted Mihai Tanasescu to state “such a possibility does exist; we are still talking about it.”

“Unless people understand we mean well, the implementation will be a disaster,” Finance minister Mihai Tanasescu says.

According to Tanasescu, the Fiscal Code law draft will be discussed by the Government on Thursday, “in one version or another, with or without the flat tax or with a dual solution in mind.” However, Tanasescu would not elaborate on the “dual solution.”

“The Fiscal Code needs to get to Parliament as soon as possible,” the Finance minister said.
razvan.voican@zf.ro