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December 21, 2018 www.intellinews.com I Page 4
Romania’s tough tax plans send markets tumbling
assets, hinting at the same time that the second pillar of the pension system might be dismantled. Later in the day, the finance ministry published a draft emergency decree including a multitude of initiatives with major economic impact, among them a so-called “tax on greed” targeting banks.
The 58-page bill also sets a maximum price for natural gas producers to charge to households, and introduces a 3% turnover tax for energy and telecoms companies.
In total, the government aims to raise an addi- tional RON10bn (€2.1bn) with the new measures. Economists have been warning that the govern- ment faces a budget shortfall following a series of populist tax cuts and wage increases for public sector workers introduced since the December 2016 general election.
The announcement of the bill follows swiftly on
a speech delivered by Liviu Dragnea, leader of
the ruling Social Democratic Party (PSD), over
the weekend, in which he slammed multinationals for failing to pay taxes in Romania, and told
the government to tackle the “banking greed and the ROBOR evolution.”
“Following in Hungary's footsteps - at this stage Romania's fundamental story looks much weaker though,” commented Tim Ash, senior sovereign strategist at Blue-Bay Asset Management.
The draft is subject to public debates for 10 calen- dar days, most of which are days off in the public sector. Most of the provisions in the bill are effec- tive from January 1, 2019.
Market plunges
The main index of the Bucharest Stock Exchange, the BET index, plunged by more than 11% on December 19, after details surfaced about the supplementary corporate taxes.
Banks’ shares saw the deepest plunges, falling nearly 20% in the case of locally-owned Banca Transilvania and 17% for BRD-SocGen. The so- called “tax on greed”, more precisely a tax on as- sets that rises with the inter-bank interest rates, will cost Romanian banks some 50% of their profits, Morgan Stanley analysts quoted by Economica.net estimated.
Energy shares lost significant ground as well, with OMV Petrom diving by nearly 13% and Rom- gaz falling by 9% as the sector was among those to be targeted by the corporate tax bill.
The Bucharest Stock Exchange expressed con- cern about the developments in a statement. "The local capital market, which includes Romanian companies that account for more than 10% of Romania's Gross Domestic Product, has entered an area that may endanger prospects for future development, including a possible promotion to the status of Emerging Market," it said.
"The investors are paying special attention to the actions of policy makers that influence the eco- nomic environment and the evolution of listed com- panies, a major aspect of the investment process being given by predictability and legislative stability."