PM Ciolos asked by PSD head to delay VAT reduction in 2017 | Elimination of special construction tax, on hold

PM Dacian Ciolos was asked by the head of the PSD, Liviu Dragnea, to delay by one year the reduction of the VAT rate from 20 percent to 19 percent.

The general VAT rate was set to fall from 20 percent to 19 percent next year, but the PSD, which won the general elections and will form the new government, has its own plan for the reduction of VAT, according to Dragnea.

In addition, Dragnea said he would not favor the elimination of the special constructions tax, claiming that the large companies were not paying their fair share of profit tax inside the country.

Read what are Dragnea’s party plans for the economy by 2020

“Of course, I told the PM that we will strictly apply the Governing Program presented during the electoral campaign and I asked him to analyze the possibility of delaying some provisions in the Fiscal Code. Thus, we have in the program the reduction of VAT to 18 percent from January 1 2018, but in the same maintaining the current rate of 20 percent in 2017 because we think we consider the reduction with only 1 percentage point of VAT this year, will not bring an advantage, nor to companies, nor to consumers,” said Dragnea.

Meanwhile, the government said in a statement that Ciolos did not confirm that the requests made by Dragnea on the delay of certain tax cuts would go through. The PM would analyse the legal implications of these changes, added the government.

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Plans for special constructions tax and healthcare contributions

“Another point of discussion is related to the special construction tax which will be eliminated only when the large companies in Romania will understand that the profits obtained in Romania have to be paid here – I am referring to the implementation of the Directive 1164 or the European Commission and other measures that will be approved so that companies to pay their taxes in Romania if registered here,” said Dragnea.

The utility firms in Romania, which belong to international groups based in Italy, Czech Republic or Germany, are among the companies that pay this tax, alongside energy giants such as OMV Petrom. This tax is also paid by the telecom operators.

The head of the PSD, the party set to control the majority in the new Parliament, added that the capping of healthcare social insurance contributions CASS will not happen any more because the party wants to consolidate the contributions paid by the individuals and the business environment starting 2018.

Initially, the Fiscal Code included the capping of the computation basis of the CASS to five average wages starting 2017.

The future of fuel excises

On fuel excises, Dragnea said that they will be slashed by 6 percent starting 2018, but only after discussions with the Competition Council.

“Regarding the reduction of the fuel excises, we see that although the global price of oil is at minimum lows, in Romania the price at the filling stations is one the highest in Europe and we are talking about the price without taxes, which seems to be hard to explain. This makes us believe that the reduction of the excise without a serious discussion with the Competition Council risks to translating into a price reduction for final consumers,” added the head of PSD.  

Ovidiu Posirca