Finance minister Mihai Tanasescu told foreign investors operating on the Romanian market that the ministry cannot afford to cut the level of taxes that companies have to pay for their employees, as it does not have an alternative source for the revenues supplying the budget.
According to Tanasescu, a cut could be operated in 2003, at the earliest.
“We are planning to cut the maximum quota of the income tax from 40% to 28-29% in 2003, so that it can be close to the profit tax (25%),” Tanasescu specified.
Romania should borrow about one billion dollars from the international capital markets next year, in order to offset the effects of a possible cut in the quota paid to the social security budget, from 37-40% to 20%, the Romanian Finance minister said during a meeting with foreign investors, organised by the Foreign Investors Council and Nine O’Clock daily.
“I admit that companies have to pay a lot of taxes for one employee, but this is the result of delayed reform in the pension system, which caused a huge imbalance between the number of employees and the number of retired people,” Tanasescu said.
What is however certain is that this aggressive policy of high taxes clearly contradicts the slogan according to which the Romanian workforce is inexpensive as compared to the other Central and Eastern European countries.
“I am not so sure that the work force is inexpensive in Romania, as it is often said. It is enough to notice that the high level of taxes actually doubles the costs related to the workforce per employee, while these costs are only 1.6-1.7 times higher in the other countries in the region,” Zdenek Turek, the chairman of Citibank Romania said.
Foreign investors are sceptical regarding the pledges made by Romanian authorities and especially those regarding the overall improvement of the business environment.
“Can we trust a government that over the first months after coming to power cancelled the former incentives that foreign investors had benefited from? We observed our commitments, we invested the money as pledged, while the government took back what it had been given to us,” Isaac Sheps, the chairman of Interbrew maintained.
“We do not know what to expect in the future,” Sheps added.
Investors are very interested in the government’s plans regarding the economic policy.
“We would like to know three certain measures you are going to take in the near future in order to improve the business environment in Romania,” Christian Esteve, the deputy chairman of Dacia told the Finance minister.
Tanasescu could only specify the “main fields” in which the government was interested, starting with rooting out corruption.