The draft to introduce the 23% single tax quota for individuals’ incomes was not debated during the Government session on Thursday, even though the Finance Ministry had finally finished all the calculations for the deduction system required to cover the losses certain taxpayers categories were likely to incur.
The Prime Minister argued this delay by the fact that he wanted to get the public opinion on this issue first. “It is important to have a such a big decision widely accepted before actually making it. In case of an opposing current of opinion, hindrances will occur. If we can’t convince the public opinion that this new mechanism (i.e. the single tax quota) can benefit the many, then the political project in itself cannot produce results,” Nastase said.
The Premier’s statement actually blames Finance Ministry’s lack of strategy in promoting this fiscal reform measure, officially announced as late as two weeks ago and unsupported by a public debate. “Such a change makes it mandatory to have maximum transparency, as well as all issues explained and everybody familiar with them, particularly since the natural impulse to resist change needs to be overcome,” Madeline D. Alexander audit partner with Deloitte & Touche consultancy commented.
Furthermore, the idea of a single quota needs to overcome all the preconceptions about the progressive income taxation as the only way to ensure social equity in line with the “whoever makes more money should pay higher taxes” principle. The single quota is a different philosophy, which encourages employees to work harder and even have more jobs, and the employers to pay higher wages “out in the open”, instead of resorting to all sorts of tax dodging schemes. The single tax quota, however, is not welcomed by the trade unions, which would rather have the fiscal deductions system in the initial draft of the Fiscal Code.
There is also a political reason for delaying the introduction of the single tax quota, as President Ion Iliescu and certain PSD (Social Democrat Party) members, who are loyal to him, still do not agree with it. Iliescu has repeatedly said the tax quota should be increased to 80% for those with high incomes. He maintained his opinion even after the Finance Ministry publicly answered him, explaining most of the European countries were tending towards uniform income taxation, which is easy to manage. President Ion Iliescu and PM Adrian Nastase met in Cotroceni on Wednesday night, and the single tax quota was precisely one of the topics they discussed.
PM Adrian Nastase said during the videoconference with the prefects on Friday that he for one was in favour of the single tax quota, but could accept another solution, as well, as long as the above-mentioned one failed to produce the desired results.
President Ion Iliescu on the other hand, on Saturday said he was in favour of maintaining the progressive taxation for the population’s incomes, as he felt it was fairer that the single tax quota, socially speaking, and furthermore the progressive taxation was used in the EU, as well. razvan.voican@zf.ro