Talks will focus, most probably, on the fiscal relaxation measures the Romanian Government plans to take through the new Tax Code.
According to the sources, the IMF experts will meet, among others, with representatives of the country’s tax authority ANAF for talks on recovering the debts of state-owned companies.
Last Friday, President Klaus Iohannis refused to sign the new Tax Code into law and sent it back to Parliament for reexamination, calling for a closer look at its implications on the state budget.
The head of state said in his reexamination request he supports fiscal relaxation through the reduction of certain taxes as long as conditions for fiscal consolidation and predictability are met, adding the country’s new Tax Code may be applied only after a thorough analysis of its overall impact on the 2016 state budget and beyond, while observing the country’s commitments. He also said that tax cuts alone, not coupled with improved tax collection and sustainable public spending, would create deficits and imbalances that will hinder economic growth.
Government representatives said the President’s decision is purely political and affects the economy and the business environment which awaits the approval of the Tax Code to draw up business plans.
The Tax Code stipulates the VAT cut to 19%, the scrapping of special constructions tax and the fuel excise duty and not the lowering of social insurance tax rates and the flat rate tax cut initially proposed for 2018 and 2019.
Representatives of the International Monetary Fund and the European Commission recently warned that the introduction of the current form of the Tax Code in Romania starting next year will create a significant fiscal deficit, which could prove difficult to correct.
Romania has a two-year stand-by arrangement with the IMF, the third consecutive deal signed since the debut of the global financial crisis. The two-year loan expires in September, and it is possible that Romania won’t fulfill all its promises under the deal.