Idea of dropping flat tax bewilders political and business circles

Tax consultants and businesspeople reject the idea of introducing a progressive income taxation system to replace the flat tax, pointing the finger first of all at the effect of a rise in the price of labour, since the upper brackets, at least, are expected to exceed the current 16% level.

The idea of progressive taxation brings to mind the maximum 40% tax levied until 2004, but the brackets could be much lower in 2011, as suggested by Finance Minister Sebastian Vlădescu.
Experts in this field say dropping the flat tax would be a step back for Romania's fiscal policy and result in the loss of competitiveness compared with other European states, which has allowed attracting a lot of foreign investment over the last five years.
Alex Milcev, tax partner with Ernst & Young advisory, brings up the rise in management costs both for taxpayers and for the tax authorities, explaining this will create a complicated and hard to manage system with all the pension and private medical insurance deductions included. "Everybody has grown accustomed to the simplicity of the flat tax and the change would not be welcome. The more complex the system, the less predictable the results."
Dan Şucu, owner of Mobexpert group, says he does not like progressive taxation "but if is good for public finances and comes in a set of other measures that could eventually lead to a VAT decrease, I could go along with it; if it's just a means to plug some holes, it won't be all right."
The scenario of progressive taxation, discussed during the previous round of talks with the IMF, as well, stirred controversy among politicians: Premier Emil Boc said Vlădescu had not been authorised to bring up the idea of dropping the flat tax, while Vice Premier Marko Bela (Democratic Alliance of Hungarians in Romania) said he did not dismiss the idea for 2011, which had been discussed by the ruling coalition. As far as the opposition is concerned, PNL (National Liberal Party) accused the government of being irresponsible for dropping the flat tax and PSD (Social Democratic Party), a supporter of progressive taxation, could only suspect Vlădescu of "starting a false topic".