Petrom CEO: I do not wish tax hikes. Raising profit tax would be a blow

25 oct 2009 Autor: Roxana Petrescu

At a time when countries such as Germany are resorting to tax cuts, the authorities in Bucharest are thinking of what taxes they should raise next year, ignoring signals from the business sector.
Mariana Gheorghe, 53, chief executive of Petrom, the biggest contributor to the state budget, says she does not want any tax raise, especially since many countries are contemplating tax cuts in response to the crisis.
"Raising the profit tax would be a blow. Indeed, maybe companies that are not posting profits will remain unaffected by such a step, but the rest are already feeling the pressure on their income because of the crisis, anyway. I believe it would be best if we didn't see any tax increases. I do not want tax raises. Most countries' response to the crisis was to cut taxes," says the CEO of Petrom, a company with 4.5 billion euros in business and 277 million euros in net profit in 2008.
Discussion over the tax raise comes at a time when revenues of the state budget have slumped as a result of the crisis, and the agreement with the IMF requires the authorities in Bucharest to find ways address the issue. Early this month, President Traian Basescu admitted in a discussion behind closed doors with foreign investors that he would rather raise the VAT instead of the flat income tax, information the Finance minister later verified. On the other hand, promoting such steps, like the VAT raise, would weaken purchasing power and therefore transfer the costs of the crisis to the people.
A number of businesspeople have stated that the solution to boost revenues to the state budget is to cut taxes and that increasing them is not in the best interest of the business sector.
The head of the biggest company in Romania says that the current political crisis only serves to make the challenges the domestic economy is facing tougher.
"We are now living the Romanian version of a democratic political crisis. We will have many challenges to respond to over the coming period and this political crisis only serves to make things worse. The answer the government was supposed to give was postponed and the lack of response only serves to make this crisis worse." In the opinion of Mariana Gheorghe, even a new government will need a time to familiarise itself with the job, which will delay the response to the crisis even more.