Romania�s commitments to IMF and European Commission

Tax on food coupons, deposit interests and compensation payments

The Government has committed to levy income tax on meal coupons, securities transactions, deposits interests and compensation payments and lift income tax exemption for IT engineers, according to the memorandum signed with the European Commission.

The document envisages the expansion of income tax base in order to include meal coupons, stock trades, deposit interests and compensation payments.

Revenues from bank deposits were exempted from the 16% income tax in 2009, but was extended for 2010.

Photo source: www.gov.ro

Higher taxes, if wage cut measures fail

The Government has committed to raise revenues, also by hiking taxes if the spending cut plan agreed with the financial institutions is not put in place by June or fail, according to the memorandum signed with the European Commission.

“If these measures are not implemented by June 2010 or don’t lead to an anticipated consolidation, the Government will put in place additional revenue raising actions, in order to eliminate any anticipated budgetary gap”.

In order to receive the third tranche from the European Commission, the Government has committed to cut wages, overtime and premia by 25% by June 1, and reduce public sector workforce and cut social security funds by 15% (including pension, and unemployment benefits).

The document also states that those cuts will be proportionately larger on inefficient and poorly focused programs that are geared towards socially vulnerable groups in the country.

Another commitment was to freeze early retirement as of June 1, 2010 until the new Pension law is enacted. Also, pensions for the disabled people will be approved only after assessed by the Ministry of Labor’s health center.

Lift of income tax exemption for IT programmers

The Government will lift income tax for IT programmers, according to the memorandum of understanding between European Commission and Romania.

The measure is aimed at raising government revenues, and is part of a broader spending cut plan that must be implemented by June.

“If these measures are not implemented by June 2010 or don’t lead to an anticipated consolidation, the Government will put in place additional revenue raising actions, in order to eliminate any anticipated budgetary gap”.

Ban on early retirement

As part of a series of austerity measures aimed at curbing the country’s deficit and national debt, the Government will also place a ban on early retirement until the Pension Law gets legislative approval, and impose 15% cut in social transfers.

The document envisages “a ban on early retirement as of June 1, 2010 until the approval of pension reform legislation”.

Termoelectrica, closed down. CFR Marfa sold

The Government has committed to take important steps in the sale of SC Termoelectrica to private investors or its shutdown, and in the privatization of the national rail freight operator CFR Marfa SA, according the memorandum.

The state-run electricity supplier Termoelectrica recorded 295.2 million lei loss in 2009, due to penalties for loans contracted by the company before December 2004. In 2008, Termoelectrica recorded losses of 344.7 million lei.

For this year, the electricity company expects loss of 274 million lei.

CFR Marfa is also operating at loss. In the Jan-Oct 2009, CFR Marfa had an outstanding debt of 230,394,000 lei on low demand.

150-200 hospitals across the country shut down

Under the same austerity plan, the Government will shut down around 150-200 hospitals across the country of the 450 currently operating, and the hospital staff will be redistributed when and if needed.

President Traian Basescu himself made public the number of hospitals that will be affected by the measure, at the meeting with the members of the ruling party.

According to sources closed to talks, the staff of the 150-200 hospitals will be distributed to other units or social assistance centers.