Fiscal experts warn: Banks might flee Romania because of the greed tax

Ioana Erdei 14/02/2019 | 15:20

Dan Schwartz, managing partner at RSM Romania, an audit, tax and consulting company, warns that the “tax on greed” applied on the banking system will encourage the increase of interest rates and boost inflation. According to the fiscal specialist, some foreign banks operating in Romania might even consider moving their business elsewhere.

“The 114 Ordinance that has been approved by the government in December will push the ROBOR reference rate even higher and it will boost inflation. There are a lot of uncertainties concerning this tax, whether it will be applied quarterly or annually. But for sure, some of the banks might consider even leaving Romania,” Dan Schwartz explained at the Tax EU conference.

Consultancy attorney Gabriel Biris explained that small subsidiaries of foreign banks will be impacted the most. “Some of the small banks in Romania are de-capitalized, and a tax on bank assets will certainly make them close their business. Also, we might see a strong financial disintermediation over the next few months. Most loans will be given by the parent bank, while government securities might be bought by the parent bank, and so on. All of this in order decrease assets value,” Biris explained.

The Romanian government recently introduced a 0.3 percent tax on bank assets from January 1, 2019, calculated at the current ROBOR 3M-6M level.

In January, Darius Valcov, a special counselor of the prime minister and a close confidant of PSD head Liviu Dragnea, announced that Romanian banks will pay quarterly the so-called “greed tax” imposed by the government, a measure that risks pushing interest rates higher in Romania. Calculated at the current money market rates in Romania, the tax on assets will be at 0.3 percent of assets on quarter, meaning that the total annual tax will rise to 1.2 percent.

A Business Review analysis showed that the Romanian government will this year collect close to RON 5.3 billion from banks’ profits through the newly imposed tax on assets, as it will be calculated and paid quarterly.

Last week, the Romanian government suggested that it may reconsider the so-called “greed tax”, but it is not yet ready to cancel the measure.

Senate president Calin Popescu Tariceanu said on Wednesday that the “greed tax” on bank assets introduced through Emergency Ordinance (OUG) 114 may be delayed through another OUG or changed in other ways so as to have less of an impact on the banking sector.

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