Romania govt. takes responsibility for fiscal reform

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Romania govt. takes responsibility for fiscal reform

The Romanian government took over responsibility for a fiscal and budgetary reform in Parliament.

The Social Democratic Party and the National Liberal Party of Romania have been together on Tuesday to take responsibility in Parliament for an extensive fiscal and budgetary reform aimed at reducing budget waste and ensuring the stability of the country's finances in the long term by eliminating tax reliefs, taxing luxury, and reducing tax evasion.

In his Parliament address, the Social Democrats Prime Minister Marcel Ciolacu called for the package of measures to include keeping a low VAT level for food, medicine and firewood, and raising the minimum wage by 10%, while imposing an additional tax on the profits of banks and large companies. Ciolacu said ordinary people won't pay extra taxes but that luxury, excessive profits and vice will see additional taxes. To fight tax evasion, he said fines would rise significantly and the goods resulting from illegal activities would be confiscated and the sums that cannot be justified will be subject to a 70% tax. The change also provides for a minimum tax on turnover, reducing the number of management positions in the public sector and limits on certain bonuses.

The opposition, which is disappointed with the government's initiatives, has three days since the presentation of the bill in parliament to file a no-confidence motion. There is little chance of this happening, however, as they are unlikely to gather the 117 signatures needed. A splinter liberal group, the Save Romania Union and the Force of the Right, said they would contest the measures in the Constitutional Court. The Alliance for the Union of Romanians, another party of opposition, says the government's proposals are damaging to the economy but does not believe they are unconstitutional.

If the Constitutional Court accepts the challenge, the bill will be automatically adopted, and the Coalition government will go on together. However, no one in Romania is under any illusions that, once this episode is over, political squabbles will stop here, given that the stakes are enormous in the run-up to next year's presidential, parliamentary, local and European elections.