Unions will have no flat tax

The unions are against reforming the fiscal system by introducing the flat tax for natural persons. This way, a liberal measure proposed by a social-democratic government might fail because of union pressures.

The last round of talks held at the Finance Ministry yesterday ended in a failure: the National Union Bloc and the Alfa Cartel do not agree with the flat tax. The only ones that allowed themselves to be convinced of the benefits the new system were the representatives of the Modern and CNSLR Fratia union confederations.

On the other hand, even though theoretically supporting the Finance Ministry’s plan, the employers associations’ representatives are imposing an unacceptable condition: maintaining the deductions currently used for the global income taxation system.

The introduction of the flat tax would result in dropping the incentives certain business fields, such as constructions, fiscal consulting, insurance, would have had in case the deductions for several expense categories had been introduced, as stipulated in the initial Fiscal Code draft. It would also result in tighter fiscal controls, intended to ensure the budget gets its revenues and in more and more of the tax-dodging economy brought out in the open.

Both the union and the Finance Ministry representatives decided there was no point in continuing the talks, considering they were not going anywhere near an agreement. “They maintain their position, we maintain ours,” Maria Manolescu, Finance Ministry state secretary in charge of the fiscal policy said.

Under the circumstances, the talks move on PSD’s (Social Democrat Party) turf, between those in favour of introducing the flat tax and those in favour of the “social equity” current promoted by President Iliescu.

With or without the flat tax, the Fiscal Code draft might be debated by the Government during next week’s session.

At the end of last week, the Prime Minister said the decision to introduce the flat tax needed wide public support, which also includes unions. Their manifest opposition could again hinder a reform measure set to replace a tedious system, ruled by costly red tape, with a clear and simple one, easier to enforce and abide by.

“The unions maintained the position they had expressed as of March this year, when they demanded the Government to cut both the minimal tax quotas (18%) and the maximal tax quotas (40%) down to as little as 25%. I think the 23% flat tax would have fixed the problem,” Maria Manolescu said.

As for employers’ associations, Manolescu said they were almost unanimously in favour of the flat tax, yet employers had requested the current deductions used for the global income taxation system to be maintained. They argued the two measures together would boost the population’s consumption.
razvan.voican@zf.ro