VAT and flat tax still in danger. Romania must reactivate privatisation programme

Romania could remain in recession this year and will not be able to avoid tax hikes unless the public sector employee wages and pension cuts decided by the government pay off over the coming months, the supplemental memorandum of understanding agreed with the IMF reveals.
At the same time, Romania will need to reactivate its privatisation programme, with Termoelectrica and CFR Marfa included on the privatisation list.
The Economy Ministry will put a large part of the state-owned enterprises up for sale, with the short list including Termoelectrica, which will be either sold or closed, and CFR Marfa, in addition to another 18 small companies, according to the memorandum. The document does not specify how much money these privatisation processes should generate.
At the same time, a solidarity tax is also being considered, which should be paid by the employees of the companies where the state owns the majority stake and whose income reaches a certain level.
Boc Cabinet pledges to take additional steps, “including tax hikes” if the 25% cut of budget paid employees’ wages, the 15% cut of pensions and the redundancies due to start this year are insufficient to lower the 2010 deficit target, the memorandum reveals.