The income tax rate decrease from 16 percent to 10 percent approved recently by Romanian senators has provoked the International Monetary Fund’s (IMF) stand on this topic.
Jeffrey Franks, IMF mission chief for Romania said that, if enacted into law, this measure would open a significant additional gap in the 2011 budget and its deficit would exceed 4.4 percent of GDP, which is a condition for the next IMF and EU disbursements to Romania.
“The difficult but necessary measures taken in July to fix Romania’s fiscal problems are now beginning to bear fruit. Revenues are rebounding, expenditures are falling to more sustainable levels, and confidence in the Romanian economy is recovering both here and abroad. Initiatives to continuously tinker with the tax system create instability in the business climate and undermine the economic recovery,” said Franks.
He added: “We expect that action will be taken to ensure that this unfunded tax cut will not be enacted.
We urge lawmakers of all political parties to approve a responsible 2011 budget and to approve the reforms needed to secure a more stable and prosperous future for Romania. We are confident that we will be able to proceed as scheduled to approve the sixth review at the IMF Board in early January once all prior conditions have been met.”