New blunders of a rehashed government

It seems as if Andreea Paul Vass, advisor to the PM on economic issues, is doing her best to embarrass him, by throwing around figures pulled out of thin air, in a domain which requires high specialization: the state budget.

Press agencies yesterday reported that the Ministry of Finance is mulling lowering the flat rate tax next year, from its current level of 16%, and that it has even run some simulations of this scenario.

Vass said: "Cutting the flat rate tax to 10%, starting in 2011, would immediately cause the profit tax receipts to drop by approximately 3.4 billion lei and income taxes to drop by 5.7 billion lei - or a total of 9.1 billion lei (1.8% of the GDP). If the flat rate tax were cut to 12%, tax receipts would drop by 6.4 billion lei, or 1.25% of the GDP in 2011, of which 2.3 billion lei in profit taxes, and 4.1 billion lei income tax".

It took Daniel Ionescu no more than 20 minutes to uncover major discrepancies in the Government"s figures. According to his calculations, if the flat rate tax were cut to 12%, the fiscal deficit would increase by about 14 billion lei, instead of just 6.4 billion lei, and if it were cut to 10%, the fiscal deficit would exceed 22 billion lei, far above the 9.1 billion lei estimated by the government. The calculations are based on the assumption that the rate of tax collection would remain unchanged in 2011, that the GDP would remain unchanged in real terms and that impact of inflation would cause the GDP to have a nominal increase of 4.2% (according to the deflation level estimated by the National Prognosis Commission for 2011).

It would seem that the new ministers of the eternal prime-minister Boc have got off on the left foot...