The Fiscal Council: Reducing the taxation rate - could cause a loss of 1% of the GDP in fiscal receipts

The Fiscal Council considers that the reduction of the income tax from 16% to 10% (ed. note. which the Senate approved on Tuesday) poses a significant threat to the Romania"s ability to meet the budget targets for the medium run assumed as part of the economic program supporter by the IMF, EU and the World Bank.

According to a press release sent yesterday by the Council, "it would endanger the meeting of the 2012 deadline for correcting the excessive deficit, according to the recommendation of the ECOFIN council of February 16th, 2010".

The Fiscal Council considers that an eventual failure toe meet the fiscal consolidation obligations taken on would be sanctioned by the international financial markets, especially given the current European context.

Thus, the Council requests that the Chamber of Deputies abide by the validation procedures specified in the Law of Fiscal Responsibility and warned against the consequences of the budget imbalance.

On Tuesday, Senators adopted a draft bill which provides a 6% cut of the flat tax rate from its current 16% level. The Senate was the first house of the Parliament that received the draft bill, and the decision lies with the Chamber of Deputies.

State Secretary Gheorghe Gherghina, of the Ministry of Finance, said that the Ministry does not support the bill, because it would have a negative impact on the state budget. Thus, for an estimated GDP of 126 billion Euros in 2011, the state would lose 1.26 billion Euros in tax receipts if the taxation rate were cut to 10% starting with January 1st, 2011.