IMF: Romania’s Tax Cut Issue Must Be Resolved By Nov 1

Romanian government must find a way to resolve the issue created by a parliament decision to lower the sales tax for food items and exempt small pensions from the income tax before the International Monetary Fund completes its assessment mission in Bucharest, IMF mission head Jeffrey Franks said.

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The issue must be addressed during this mission, Franks said Thursday, adding that the country's macroeconomic indicators for the third quarter are "looking good."

Franks said preliminary discussions with Romanian officials indicate the third-quarter budget deficit target was broadly achieved and the forecast for the fourth quarter is optimistic.

Romania's deficit target for 2011 will be left unchanged at 4.4% of the gross domestic product, the IMF official added.

On Tuesday, Romanian lawmakers adopted a bill cutting to 5% from 24% the value added tax level for bread, meat, milk, edible oil and sugar, in a move termed as "erroneous" by representatives of the ruling Democrat Liberal Party.

According to the democrat liberals, the MPs thought they were voting a committee report to reject the tax cut.

The parliament also adopted an amendment to the Tax Code that exempts small pensions from income tax.

The two laws will be sent to President Traian Basescu for promulgation.

An IMF team will be in Bucharest until November 1 to review Romania's progress under a EUR13 billion agreement and decide on the disbursement of a new loan tranche.

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