The MFP official stated that next year’s budget projection does not take into account the rise in any major tax – the flat tax, VAT – and that the reinvested profit will be further kept tax-free (a measure to be enforced starting October 1, 2009), but that MFP still has to analyze the impact of the implementation thereof.
Pogea said that many public institutions are overstaffed, including also Ministry he is heading, and that therefore, in the 2010 budget, staff expenditures will be reduced from 9 to 8.34 percent of the GDP.
As regards the chance of budget adjustments, other than the one planned in August, being operated this year, the Finance Minister said – referring to the current economic context – that this is an exceptional situation and budget adjustments will be made „to perform the necessary corrections whenever required.’
Public spending will be reduced by 4.5 billion lei (more than 1 billion euros) at the budget adjustment this August, Minister of Public Finance Gheorghe Pogea told a press conference on Tuesday.
In order to keep within the new budget deficit target of 7.3 percent of the GDP agreed upon with the IMF for 2009, MFP will have to reach fiscal adjustment measures worth a total of 5.5 billion lei (some 1.29 billion euros), of which 4.5 billion lei will result from cutting back on public spending.
On the other hand, the minimum tax on companies will funnel 300 million lei (about 70.5 million euros) in additional revenues to the budget.
Budget revenues are estimated to decrease by 17.5 billion lei (about 4.11 billion euros) in 2009, under the effect of the unfavorable economic conditions.
A negative budget adjustment will be operated in August, based on a decline of economy by 8 – 8.5 percent this year (from the initially estimated -4.1 percent), an inflation of 4.3 percent and a current account deficit of 5.5 percent of the GDP.
The GDP is estimated now at 497.3 billion lei (117 billion euros), down from the initial 531.25 billion lei (some 125 billion euros).
At the planned budget adjustment, state guarantees for projects with European financing will be supplemented by 400 million euros in 2009, and by 200 million euros in 2010, respectively.
The unemployment budget will get an 864 million lei boost (about 203 million euros), and the pension fund will receive 500 million lei (some 117 milion euros) more. In 2009, as much as 5.4 billion lei (some 1.27 billion euros) will be transferred from the state budget to the pension budget, to rebalance it.
According to Minister Pogea, the enforcement of the measure of keeping reinvested profits tax-free as of October 1, 2009 will reduce budget revenues by 140 million lei (almost 33 million euros), and the impact of the 2 pct increase in the pension point as of October means 200 million lei (some 47 million euros) in budget efforts.