IMF talks breed VAT and flat tax hike

The maelstrom of the much denied tax hike scenarios swirled into a dramatic alternative for the businesses in Romania and for the average people: the VAT will go up from 19% to 24 or 25% and the flat tax will increase from 16% to 20%.
Those were the shock-figures the market was given yesterday afternoon, following new rounds of talks between the authorities and the IMF mission.
Whereas the figures may not be nailed down yet, the prospect of a rise in VAT along with the flat tax tends to become a certainty, as this is the IMF’s requirement in order to agree to a budget deficit increase from 5.9% to 6.9%, given the weak performance of the economy.
The public’s ears have grown accustomed with the VAT increase perspective for more than one year, especially since neighbouring Hungary did it, too, but the significant hike of the profit and income tax would be a really hard blow to the business and to the living standards.
The “kindness” displayed by the IMF last year has turned into a “demanding” tone when addressing the Government: “You have a big hole in the budget. How do you plan to credibly fill it?” And the Government has run out of ideas and time because it cannot afford to the let the IMF mission leave Bucharest without an agreement, while further down south Greece is dealing with the disaster of international credibility loss.
The Government was supposed to make a choice last night with the decisive meeting between the IMF delegation and President Traian Basescu to be held today.