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Romanian Transporters Fear Potential Tax Hike May Cause Layoffs, Tax Evasion

Romanian transport operator representatives said Friday that the sector will see layoffs, wage cuts and an increase of tax evasion, should the Government decide to lower the budget deficit by increasing the VAT and the flat tax.
Romanian Transporters Fear Potential Tax Hike May Cause Layoffs, Tax Evasion
25 iun. 2010, 19:17, English

George Buruiana, general manager of Romanian freight railway operator Servtrans said the VAT increase will entail wage cuts, adding that his company is mulling to stop awarding meal vouchers, as they will also become taxable. Buruiana said a viable solution would be doubling the VAT for luxury items.

Catalin Cornea, manager of railway supplier Remar Pascani, said the tax hikes will not help the economy, but they will lead to staff cuts, as his company will attempt to manage the ensuing cost increase.

Constantin Pestrea, general manager of freight transport operator Unifertrans said the austerity measures will affect companies and individuals to an equal extent, adding that no neighboring country has imposed such a sharp VAT increase. Pestrea highlighted that his company already laid off about 120 of 750 employees in 2009.

Augustin Hagiu, president of the Romanian Transport Operators’ Federation, said the tax hike will lead to an increase of tax evasion and bankruptcies, the disappearance of foreign investments, and a „complete freeze of the transport sector.”

Radu Dinescu, secretary general of Romania’s National Transporters’ Union, said foreign investors will start to avoid Romania, while companies will compensate the tax hikes by cutting wages.

The Romanian Constitutional Court’s Friday ruling, rejecting certain articles of the austerity plan, left the Government unable to apply pension cut measures, as the austerity laws must return to Parliament to be made to agree with the Constitution.

Romanian Prime Minister Emil Boc said Friday the Government has prepared an alternative package of measures to reduce the budget deficit. These measures will be discussed with the IMF, European Commission and the World Bank. Boc did not say whether this package includes VAT and flat tax hikes.

People close to the matter told MEDIAFAX the Government plans to enact an Emergency Ordinance hiking taxes, which would increase VAT from 19% to 24% or the flat tax from 16% to 20%-22%.

Recession-hit Romania, which is relying on a EUR20 billion international rescue loan led by the International Monetary Fund, has pledged to drastically cut public spending and the Government has adopted laws cutting public sector wages by 25% and pensions by 15%.