THE NEGOTIATIONS WITH THE IMF, THE VAT AND THE TAXES Have you heard that one about Ogică...

With just two exceptions - BURSA and "Adevărul financiar" - the entire media yesterday got involved in the hysteria around the so-called "imminent" increase of the VAT and of the tax rate.

Union leaders, politicians and economic analysts started arguing against raising taxes, saying that this would stimulate the underground economy and would increase tax evasion (let us note that while this argument apparently has merit, it is in fact pure speculation and can not be used in the negotiations with the IMF).

Bu the Finance Minister Sebastian Vlădescu earlier said he was considering expanding the tax base, which doesn"t necessarily imply raising the already existing taxes.

Quite the contrary, in his previous statements for "BURSA", it would seem that Vlădescu is aware this would deepen the recession, which is an outcome he is not willing to accept, in fact, he actually considers economic growth as the most important goal of the current government.

A statement which was made yesterday by Jeffrey Franks, the head of the IMF mission, confirms that the mass-media was overzealous in claiming that a raise in taxes and income taxes was "imminent": "I will not discuss any specific fiscal policy measures, before we have reached an agreement with the Romanian authorities".

Yesterday"s news did not deny the possible raise in taxes and income tax, but they did not confirm any of the numbers being thrown around by the media (for instance, one financial publication was spreading panic by posting on the front page the increase in VAT from 19% to 24% and of the profit and income tax from 16% to 20%), but said that "people who attended the negotiations had yet to reach an agreement".

In reality, the Government"s big problem in these negotiations is not the increase in taxes or the layoff of public sector workers, which the media claimed it was a "one or the other" solution, as if the solution of making the public sector more efficient is out of the question, like the private sector did and continued to do.

The leader in the "arrear chart" is "Compania Naţională a Huilei" S.A. (the National Coal Company) with 1.5 billion lei. Together with the other "Top 10" debtors, they owed an aggregated 2.5 billion lei.

That"s 305 of the budget deficit, which amounts 8.22 billion lei.

the real issue faced by the Government in these negotiations would be to come up with business plans for making state-owned companies become profitable.

But after the panic caused by the mass media by announcing taxes might be raised, we will only be happy if it actually comes through.

Feels like manipulation.

But this time it seems to originate from the Cotroceni palace...