Government keeps tax hikes and other harsh measures for Plan B
The additional letter of intent with the IMF talks about
redundancies, monitoring of high income individuals by the tax
authorities, freezing early retirement and including incomes from
capital gains in the taxation base subject to 16% tax.
Should wage, pension and unemployment benefit cuts turn out to be
insufficient for reaching the new budget deficit target of 6.8% of
GDP, the Government will eventually resort to tax hikes, "as
needed" - this is the commitment taken by the authorities to the
IMF in the new letter of intent.
The document signed by Finance Minister Sebastian Vladescu and NBR
Governor Mugur Isarescu, which will be sent to Washington, only
serves to clearly outline an obvious prospect for the entire
market: the talk about the tax hike threat was only postponed by
President Basescu's programme, because the implementation of wage
and pension cuts raises a lot of doubts.
Although the cuts should be enforced as of the 1st of June, the
Government has yet to clarify what legislative steps are necessary.
One of the necessary conditions that have to be met before new
tranches are released by the IMF is to get a ruling of the
Constitutional Court certifying the constitutionality of the
normative acts to be passed.