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The so-called "public debate" of the new Fiscal Code with the representatives of the academic and business sector, initiated by the Ministry of Public Finance, has confused even the employees of the Ministry.
Dan Manolescu, Secretary of State in the Ministry of Public Finance, said on Friday that the working group for the Equity Markets of the Coalition for the Development of Romania (CDR) has not made any request for the reduction of the taxes on capital gains.
Dan Manolescu said that "there have been talks within the working group of the CDR, on the subject of the stock market, but the issue of reducing the taxes on capital gains has not been brought up".
He said: "We have considered that it is not the tax rate that currently discourages investments in the stock market, but a number of other eight barriers that were uncovered", and he went on to say: "So far, I have to confess that this issue has not been brought up and the Ministry of Public Finance has not taken it into consideration".
The statement made on Friday by the state secretary has shocked the equity market, as its representatives said that the cutting of the taxes on gains from stock market investments has been a recurring theme in the requests made to the authorities.
Sources from within the Coalition told BURSA that "not one, but several talks" were held concerning the cutting of the taxes, with Ioana Petrescu, the Minister of Public Finance herself.
Under these circumstances, it would seem that the notion of "public" which the Minister of Finance used when she mentioned the selection of the participants in the talks only included the members of the Association for Romania's Development, which did seems to have focused more on the interests of foreign investors, rather than on "Romania's development", eliminating a request which the Association of Brokers has reiterated for years, a measure which would indeed encourage stock market investments.
Dan Paul, the president of the Association of Brokers, told us that the Association has constantly asked for the reduction of the taxes on capital gains: "The Association supports the 16% tax rate on the net annual gain for every taxpayer, for securities sold or bought back within less than 365 days and of a 1% rate for securities sold or bought back after more than 365 days".
Octavian Molnar, member on the Board of Directors of the BSE, says: "Stock brokers have been constantly sending the Ministry of Public Finance requests concerning the cutting of taxes, every time the minister was replaced. In my opinion Mr. Manolescu has inaccurate information", Mr. Octavian Molnar says.
Still, representatives of the ministry claim that the only debates that were held were those concerning the elimination of the eight barriers which, in the opinion of the CEO of the BSE, Ludwik Sobolewski, hinder the development of the Romanian stock market.
"The Eight Barriers" is a document through which Sobolewski has replaced the strategy for the development of the Romanian stock market, a document backed by the Coalition for Romania's Development (CDR). The Coalition is perceived as a platform for promoting foreign investors, which has found supporters among domestic organizations in order to justify its existence.
Meanwhile, the National Bank of Romania, through the voice of Nicolae Cinteză, the head of the Banking Oversight Division, is asking the Ministry of Public Finance to eliminate the 16% tax on interest gains, to increase savings deposited with banks.
• Nicolae Gherguş: "The money invested on the stock market penalizes the wasteful spending of the money from the state budget"
Nicolae Gherguş, general manager of Confident Invest and vice-president of the Association of Brokers considers that just like in the case of the "Group of the Eight Barriers", the CDR looks like a trans-institutional organization, whose role is to "provide the Government with the necessary backdrop for group photos with the business sector and allow it to make decisions based on heavy lobbying".
Nicolae Gherguş said: "I've talked before about how ridiculous the Eight Barriers are and how they monopolize the real issues of the stock market, and Mr. Dan Manolescu of the Ministry of Finance clearly proved it, by saying that < ..there have been talks within the CDR, but the issue of cutting the taxes on investments has not been brought up, only the issue of the eight barriers... >. In other words, the measures to stimulate investments are not deemed as important as a few minor back-office problems found in the "8 Barriers" document, which, unfortunately, represents the vision of those who have taken on the management of the BSE and of the Romanian stock market. On the other hand, the banking lobby, through the voice of Nicolae Cinteză, has asked the Government to cancel the tax on bank deposit interests, which represents a new episode in the international soap-opera, in which banks finance incompetent governments all the way, so that, if the need arises, the governments have to save the banks from the default caused by their own incompetence".
Nicolae Gherguş says that banks already benefit from a plethora of laws through which the state generously grants them, directly or indirectly, the monopoly of the transfers of citizens' and companies' money, and through the elimination of the tax, they would be given an additional facility. "This is outrageous, as this tax exemption would generate competition precisely for the government bonds issued by the Ministry of Finance and the municipal bonds, taking away their main advantage, the fact that the revenues derived from them were not taxable", the manager of Confident Invest says.
According to him, the Ponta government, "instead of encouraging its citizens to invest in the stock market, just like it has preferred to sell huge stakes of quality shares it owned and to only throw domestic investors breadcrumbs in the IPOs of Romgaz or Electrica, is now creating an attractive environment to conceal the incompetence of banks, which have come to the point where they can't even pay real-positive interest on deposits to their customers, due to the fixed operating costs".
Gherguş concludes: "The measure is obviously populist and favors the masses who lack financial education, in order to get them to place their money into bank deposits, which the banks will then use to lend to the oh-so-generous government. Having people invest in the stock market does not help the government, because stock market investors are rational and they sanction the wasteful spending of public funds".
• Ludwik Sobolewski: "The BSE has prepared a set of measures intended to stimulate long term investment"
Ludwik Sobolewski, the CEO of the Bucharest Stock Exchange, told us that the BSE has prepared a set of measures to stimulate long term investments and more. According to him, these measures will be discussed with the stakeholders of the stock market, and then, the final proposal will be sent to the Ministry of Finance.
Ludwik Sobolewski also told us that, aside from stimulating long term investments, one second measure which the BSE is working on will allow the existence of a minimum non-taxable income, and the third measure will allow the deduction of a notional interest for issuing new shares, as in the case of IPOs or share capital increases.
The CEO of the Bucharest Stock Exchange considers that "if the basic principles of the taxation of bank deposits get changed, especially in the form of a cut of the tax rate, the same should apply to the investments on the stock market". According to him, "this is an aspect that concerns the equal treatment of investors and of the customers for banking services".
Sobolewski also says that the BSE supports the indiscriminate treatment, similar taxation of revenues from interest earned on bank deposits and stock market gains, as well as the reduction of the main tax rates, if they will be considered as well. "We are also proposing incentives for investing in risky financial instruments, because they are essential for stimulating the economy and economic growth - a durable increase ", the CEO of the Bucharest Stock Exchange concluded.
• Lucian Isac: "The stock market should benefit from the same treatment as the banking system"
Dan Popovici, the general manager of OTP Asset Management, says that it would be totally unfair to grant fiscal incentives for long term saving while having that regulation not apply to other financial instruments, such as the stock market.
Lucian Isac, the general manager of Estinvest, shares the same opinion as Dan Popovici, and claims that the stock market should receive the same treatment as the banking system, or else an unfair competition will be created between the banks and the market, and he argued that "gains are the same thing, regardless of their size and whether they come from bank deposits or from stocks".
He also warns that the eight barriers "make no mention of taxation".
Analyst Valentin Cismaru considers that the Association of Brokers should ask for lower dividend tax rates, as well as the simplification of the taxation and reporting of stock market gains. He says: "Bank deposits are free-risk instruments, no intervention should be made on earnings derived from them, but rather, instruments with high risk and high returns should be created, which should then receive financial incentives".
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