IMF approval expected for tax cuts

The Finance Ministry is to make a decision next month on how much to cut the profit tax as of January 1, 2005 following consultations with a team of IMF experts due to arrive in Bucharest. The details of the fiscal strategy for 2005-2007 will be finalised during this visit. “The profit tax cut goal undoubtedly stands. We have several scenarios of various tax levels ready and we will see exactly how far the cut goes together with the Fund’s experts,” Mihai Tanasescu told Ziarul Financiar. He says the profit tax cut will come with an increase in the dividend tax. “The profit tax cut will probably be offset, though not entirely, by the increase in the dividend tax,” Tanasescu says. Since the second half last year he has repeatedly mentioned the prospective profit tax cut by 5% to 20%, while the dividend tax should go up from the current 10% to 15%. This would be Romania’s only chance of improving its fiscal competitiveness somehow, given that the profit tax is visibly lower in all the countries in the region. ZF