Update: Gov’t announces the ‘tax on greed’, banks directly targeted. Decisions on Pension Pillar II, gas price

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Romanian Finance minister Eugent Teodorovici, has announced on Tuesday that banks will be differently taxed, according to ROBOR (Romanian Interbank Offer Rate). The higher the index is, the higher taxes will be, says the new tax, called “the tax on greed”.

The FinMin has announced this measure among other several fiscal measures envisaged for 2019, such as the EUR 10 billion investment fund, the decrease of taxes in constructions, but also the controversial decision to take the “vice tax”, which encompasses money normally intended for the investments in hospitals and to the big healthcare programmes to counter chronic diseases, and redirect it to the state budget to cover for the state employees’ salaries and for other expenses in the central administration.

The decision regarding the tax on greed comes two days after PSD chairman Liviu Dragnea had lashed out against banks and said the banking system does not endorse the Romanian economy, and there are “huge differences between credit interest rates and the deposit interests. “In Romania, the difference mounts to 7%, and it is 2.1% in the EU”, Dragnea argued, accusing that banks are making profit in Romania from the “ROBOR game that they are agreeing among one another”.

So, the Finance minister came up with this decision to install a greed tax on banks, arguing it is meant “to protect Romanian citizens”.

Therefore, the tax is zero if the ROBOR average level stands at 1.5% for 3 and 6 months. The tax will be 0.2% if the ROBOR share ranges from 1.5% to 2% and 0.4% when ROBOR is 2-2.5%, 0.6%- ROBOR -2.5% to 3% and 0.9% if ROBOR is 3 to 3.5%.

Depending on the banks’ greed, we’ll see the impact of this measure“, the Finance minister said.

The main measures announced by the Minister of Finance:

–  Capping of the gas price for a three-year period: RON 68 megawatt/hour. The measure will apply until February 28, 2022;

–  In the case of Pension Pillar II: Funds can invest in public-private partnerships; administration fee drops from 2.5% to 1%; the second commission of 0.05% of the assets changes according to the fund’s performance; a person may withdraw the money, but not earlier than 5 years, and the withdrawal fee is 2% of the assets;

– The vice tax will go directly to the state budget, and from there it will be redirected to health, culture, etc.

– The development and investment fund will be worth EUR 10 billion. Projects can be funded in the fields of health, education, water – sewerage, electricity and gas networks, transport – roads, Culture, sports infrastructure. No local authority can have more than two projects at a time. They can also apply to universities;

– The Public-Private Partnerships Fund, at the level of the Government Secretariat General (SGG), of the National Prognosis Commission where funding is being made to the public institutions that join these projects;

–   Spa programme, funded from the SGG budget, through the Prognosis Commission budget, budget allocation of about RON 310 million in 2019. The maximum ceiling will be of EUR 200,000 per project.

–   The gROwth programme: the construction of 1,000 kindergartens. Budget allocations will be of up to EUR 500,000.

– The pension point increases to RON 1,265 as of September 1, 2019. The social allowance will be of RON 704 as of September 1;

–   In the education sector, the wage will increase as of September 1, 2020, previously stipulated in the wage law for 2022;

–   In the construction sector, the employees’ social contributions will be reduced by 3.75%;

–  The holiday vouchers for state employees will continue to be offered worth RON 1,450, i.e. the previous minimum wage, not the one increased from January 1, 2019;

–    The Minister of Finance may approve monthly limits for commitment credits for credit release authorities entirely from the state budget, may modify the limits in special cases;

–    the state-owned companies will transfer 35% of the amounts for investments not spent within 35 days of the date of approval of the 2018 financial statements, as dividends or payments to the state budget;

–    European projects will be in charge of the managing authorities, which will say yes or no on awarding the contracts.

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