Government works with 2 scenarios for cutting flat tax: 10% or 12%

According to documents seen by Ziarul Financiar, the Boc government has two scenarios for cutting the income tax in 2011: 10 or 12% . The revenue reduction is expected to be compensated for by the fact that at least 40,000 jobs would surface.

The plan has however been rejected by some of the members of the cabinet for the time being, as well as by the National Bank. The decisive position will be that of president Traian Băsescu.

Facing increasingly harsh criticism from businesspeople, the Boc government has drawn up a scenario of reducing the income tax to 10% or 12%.

This would be the government’s first move to regain trust of business people, who have been seriously affected by the VAT hike and by the recent modifications brought to the Fiscal Code.

According to documents seen by Ziarul Financiar, were the income tax to be cut to 10%, revenues collected to the state budget would be 3 billion RON (700 million-euro) lower, with 80,000 jobs surfacing, along with the social contributions and other taxes due.

If the tax is cut to 12%, revenues would decline by only 600 million RON (150 million euros), but only half as many jobs would surface.

The government collected 5 billion euros from the income tax in 2009, at a 16% rate.

The plan has however been rejected for the time being by some of the members of the cabinet, as well as by the National Bank. The decisive position will be that of president Traian Băsescu, who was the most eager advocate of cutting the income tax to 16% at the end of 2004. The decision is expected in October.