Erik de Vrijer: IMF, no preference for flat tax or progressive taxation; collections must not decline

The IMF does not have a preference for the flat tax or for the progressive taxation of revenues, but it is important that the fiscal reform ensures a sufficient revenue level, allowing the Government to make the priority expenditure for economy, education, health system, infrastructure, International Monetary Fund Mission head Erik de Vrijer told an interview to Agerpres.

According to Erik de Vrijer, several indicating targets and performance criteria were missed, among the most significant being the ceiling for the central administration arrears, which was missed by approximately 60 million lei, and the ceiling for the arrear stock of the local authorities, which was also missed, as, instead of decreasing, it increased a bit.

The highest risks for the economic growth and the banking sector are, according to De Vrijer, the continuation of the political instability in Romania, which can impede the economic policy efficiency, can increase the risk premium and the funding costs for economy and can affect investments, and the deepening of the recession process in Europe or of the financial crisis in the euro area, which can lead to a decline in the Romanian exports, with effects on the banking system and on the banking loans and on new investment funding.

The IMF has not asked for the increase in the excises for alcoholic drinks, they believe it is appropriate to maintain the real value of these excises rather than the nominal value in lei. Moreover, the IMF has agreed to a simplification of the co-payment system in health, as the current version has simple fees. This co-payment system will be implemented next year. About the VAT payment upon the invoice collection, the IMF representative says that in order to allow the appropriate preparation of this measure, they have found it is more suitable to implement it starting in 2013 rather than sometime this year.

Concerning the big fortune control, De Vrijer says that the procedures introduced so far are good and, even if it may seem that these procedures are being carried out slower than expected, progress is being made and it is important that the taxation authorities must have capacities, in case there is no cooperation, to initiate investigations to avoid any irregularities.

The IMF is pleased with the Government’s commitment of improving the state-owned enterprise sector through private management and privatization, but say they cannot control the market conditions and the level of interest in these companies. For this reason, they do not specify any amounts in the projections they make.

At last, referring to the adoption of the euro currency, Erik de Vrijer says that there still are differences between Romania and many states in the euro area concerning the structure of economy, the economic institutions and the way in which the economy is sensitive to various shocks.

In order to advance in the convergence process with the euro area and the European economies, they very much support reforms that make the economy more productive and more competitive, more flexible. He says that once we enter the monetary union, we shall lose the currency exchange rate as an instrument for the shock absorption and for approaching the competitiveness pressures and that until these economic reforms are not fully implemented, it is wise not to access the euro area yet.

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