Gala BURSA "Deceniul European din Centenarul României"
BURSA 06.11.2017

TEODOR STOLOJAN (translated by Cosmin Ghidoveanu)
 
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     Finally, after many statements concerning the fundamental changes in the fiscal policy, announced from one day to the next and then denied, we have the argumentation note and the draft of the emergency ordinance to amend the Tax Code published, which the Ministry of Public Finance will apply starting with the beginning of next year.
     Now, we can draw conclusions concerning what the PSD- ALDE government intends to do in the sector of fiscal policy, to the extent where it doesn't change its mind at the last minute.
     First of all , a positive fact for Romania: a European regulation to combat tax evasion and abusive fiscal planning is being transposed in Romanian legislation. The main measures concern: capping the interest rates which can be accepted when calculating the taxable profit for loans received from parent companies; the taxation of capital gains when transferring some assets abroad; the denial of tax benefits resulting from abusive tax arrangements; the banning of transfers to tax havens. What is important is that the National Tax Administration (ANAF) to also have the ability to implement these fiscal provisions to prevent the reduction of the taxable base in Romania, by transferring the profit to tax jurisdictions with a lower or even zero tax rate.
     Second of all , a fiscal arithmetic operation is being done, specifically, the contributions to retirement and healthcare which are currently borne by the employer, are included in the employee's gross wage. The payment of those contributions to the special pensions and healthcare budgets will also be done by the employer, through tax withholding, but in the name of the employee. The Ministry of Labor and Social Justice supports this transfer through the fact that employers, using some ambiguities of the legislation in effect, weren't transferring to the retirement and healthcare funds, the contributions they owed. Of course we can ask ourselves whether it wouldn't have been easier to remove from the current legislation the ambiguities in question concerning the responsibility of employers, compared to the measure of transferring those contributions to the employee which requires the modification of millions of employment contracts. But as they say, never ask a public administration "why"?
     In order to compensate the effect of the increase of the amount of the social security contributions borne by the employee, through the calculation of these contributions to a higher gross salary, a cut of the income tax from 16% to 10% is being proposed. This cut of the income tax will not only apply to salaries, but also to other incomes, such as interest income, investments (with the exception of dividends), asset rental etc.
     Third of all, the minimum required wage will be raised from 1,450 lei, to 1,550 lei (in the current system), respectively to 1,900 lei, having the effect of the shift of the social security contributions from the employer to employee, simultaneously with the increase of the personal deductions, taken into consideration when calculating the taxable wage. As a result, for an employee (a single person), the following changes will occur:
     a) the minimum gross wage will be raised 31.0% (1900 compared to 1450);
     b) the net wage will increase 9.1% (1162 lei, compared to 1065);
     c) the labor cost (for the employer) will increase 10.9% (1943 lei, compared to 1780).
     We do not yet know the reaction of the business sector, particularly of the sectors in the area of textiles, clothing, footwear, car parts etc, where the competitive advantage comes from the labor cost. What we do know is that over a million employees are paid the minimum wage and therefore will benefit from a real increase of the net minimum wage, because the employers grant will be forced to grant the gross minimum wage of 1,900 lei.
     We do not have the confirmation whether the spectacular increases in salaries of 2019-2020, announced by the PSD-ALDE include or not the effect of the shifting of the social security contributions from the employer to the employee. Based on the statements of the president of the PSD, who said that the law of salaries can only be applied together with the transfer of the contributions from the employer to the employee, it would follow that these announced salary increases also include the effect of the transfer of the social security contributions from the employer to the employees. Or, as can be seen, in the case of the minimum wage, for an increase of 31% of the minimum gross wage, what matters for the employee is the 9.1% increase of the net salary.
     For wages that start at 3600 lei, for which personal deductions are no longer granted for the calculation of the taxable wage, the changes for the employer and employee are insignificant. Thus, in the case of a gross wage of 3600 lei, with including the transfer of the social security contributions from the employer to the employee (respectively, the equivalent of a gross salary of 3000 lei under the current circumstances), the changes are the following:
     a) the gross wage increases 20% (3600 lei compared to 3000);
     b) the net wage increases 0.19% (2108 lei compared to 2104);
     c) the labor cost decreases for the employer by 0.03% (3681 lei compared to 3682).
     In conclusion, if the government doesn't keep the cut of the wage tax rate from 16% to 10%, all the employees, including those being paid the minimum wage, will lose out when it comes to the net wage. Also, the employees may see their net wage decrease, if the employers don't raise the gross wage to match the effect of the transfer of the social security contributions from the employer to the employee (to that end, the union confederations are asking for the introduction in the law of the requirement for employers to increase the gross wage).
     Also in limbo is the situation of the IT sector, where no wage taxes are paid, and the shift of the social security employers, to the extent where they want to maintain the net salary of the employee.
     Fourthly, , the profit tax will drop from 16% to 10%, but with the clarification that the limit for companies to qualify as microenterprises will be increased from 500,000 Euros to 1 million Euros. And for microenterprises the tax rate will be 1% of the revenues.
     Under these circumstances, microenterprises with profitability that exceeds (calculated in relation to their revenues) 6.25% will pay a lower tax than they do now, just like all the microenterprises with a profitability below 6.25% will suffer losses due to the obligation to pay a tax of 1% of their revenues.
     Essentially, the dream of the PSD-ALDE to move to the taxation of income of is taking place for most of the Romanian companies (according to the president of the Association of Financial-Banking analysts, in 2016, 90% of the companies that posted revenues, had a turnover below 1 million Euros).
     Fifth of all , the minister of labor and social justice announced that the rate of contribution for the private mandatory pension (2nd pillar) will be reduced from 5.1% to 3.7%, but the size in absolute amount will remain the same because the percentage of 3.7% will apply to a bigger gross salary. In reality, the media has already revealed that a percentage of 3.7% is not enough to ensure the same amount in absolute size and that a percentage of 4.25% is necessary. So far, the Ministry of Labor and Social Justice has not responded to this finding.
     What is more worrisome is the uncertainty on whether the second pillar would be made optional. As I have already said at other times, given the demographic evolution and the free movement of the labor force in the European Union, the solution would be to strengthen the 2nd pension pillar and not weaken it.
     As was to be expected, on a macroeconomic level, according to the estimates of the Ministry of Public Finances, the revenues of the consolidated budget will decrease by 5.1 billion lei, as a combined effect of the increase of the social security contributions by 8.6 billion lei and of the decrease in the revenues of the state budget from the taxation of wages, profit and other incomes with 13.7 billion lei. As usual, the government's hope lies with the boosting of the economy which the fiscal measures which will be generate.
     Instead of a fiscal revolution, we have changes of the tax rates, the moving around of the retirement and healthcare contributions and a still unclear outlook on the fate of the budget balance in 2018. 
 

 
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English Section
21.11.2017
     The Council of the European Union and the European Parliament have sent to the ECB, in the beginning of this year, a request concerning the sending of some proposals to revise the framework for managing crises.  details
20.11.2017
ANPC STRIKES AGAIN
     * BCR: "Ongoing contracts no longer contain the clauses that have been subjected to examination"
     * Sources: "ANPC has 6 lawsuits against BCR, which will lead to enormous losses for Erste Bank if BCR loses in court"
       After forcing Raiffeisen Bank to eliminate the unfair practices from the loan agreements, the National Consumer Protection Authority (ANPC) strikes again, this time the biggest bank in the system. BCR lost in the court of first instance, against the ANPC, in a class action lawsuit concerning abusive lending clauses.  details
16.11.2017
THE QUICK RISE OF THE INDEX WHICH SETS THE TREND FOR INTEREST RATES ON LOANS DENOMINATED IN LEI ISN'T STOPPING
     The 3-month ROBOR rate, which is used to calculate the interest rates, the majority of the loans denominated in lei, has jumped past the 2% psychological level, and yesterday reached 2.06%, up from Tuesday's 1.92%, according to data from the NBR.  details
16.11.2017
THE PARLIAMENT IS ASKING FOR INFORMATION CONCERNING THE INVESTIGATIONS WHICH OMV PETROM HAS BEEN SUBJECTED TO
     * Minister Toma Petcu, former ministers Răzvan Nicolescu and Victor Grigorescu, the representatives of the state in the executive structure of OMV Petrom and Mihai Busuioc, the president of the Court of Auditors were heard today in the Investigation Commission
       The executives of OMV Petrom mentioned, in a letter addressed to the parliament, the existence of four lawsuits brought by the National Energy Regulation Authority (ANRE) and of seven audits by the Authority, between 2012-2017, as the recent request for information by the Commission for the Investigation of the activity of the ANRE targeted a period of 12 years, from 2015 to 2017.  details
14.11.2017
THE EURO AT AN ALL-TIME HIGH
     * Vasilescu: "We cannot say that the currency market has gone off the rails, the exchange rate has moved 4 bani in 4 days"
     * "Perhaps it is a simple coincidence the fact that on November 8th was approved the Emergency Ordinance of the Fiscal Code and it was also on that day that the Euro rose past 4.6 lei", said Mr. Vasilescu
       The leu yesterday reached a historic low against the Euro, 4.6495 lei/Euro, up 1.05 over the previous meeting, marking the fourth day where the exchange rate was above 4.6 lei.  details
13.11.2017
     In October, the Romanian Commercial Bank, through Schoenherr și Asociații, has submitted, with the County Court of Bihor, a request for the insolvency of the European Drinks group, owned by the Micula brothers. That group includes: European Drinks, Transilvania General Import-Export, European Food, Starmill SRL, Scandic Distilleries SA, Rieni Drinks.  details
10.11.2017
DUMITRU COSTIN (BNS):
     * The executives of OMV Petrom, summoned to appear in the Parliament for the third time
     * Sevil Shhaideh and Radu-Spiridon Cojocaru, the representatives of the state on the Supervisory Board of OMV Petrom, also called in for hearings
     * Costin: "We have notified the Audit Body of the Prime-Minister"
       The management of OMV Petrom, namely Mrs. Mariana Gheorghe, as well as the representatives of the Romanian state on the Supervisory Board of OMV Petrom, Sevil Shhaideh and Radu-Spiridon Cojocaru will be invited to appear in the hearings on the Investigation Commission for the activity of the ANRE, the members of the Commission decided on Thursday.  details
09.11.2017
     * The fear that wages will drop is unjustified
       The government's proposal to transfer the social security contributions exclusively to the employee is not at all a social-democratic measure and not even one of redistribution, rather it is one of an ultra-liberal nature, which leaves the employer in the unique position in Europe of not contributing in no way whatsoever to the social security systems (retirement and unemployment) or healthcare.  details
08.11.2017
     * A 39% stake belongs to Russian millionaire Sergey Lobanov, who is being criminally investigated in Russia for alcohol contraband
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07.11.2017
     * Brokers: The depreciation of EL, amid the drop in the market, as well as due to deal with the FP
     * Adrian Simionescu: "Investors feel the price at which EL has acquired from the Proprietatea Fund its stakes is very high and unjustified"
     * The FP-Electrica deal, among the topics of the PNL vote of no-confidence against Energy minister Toma Petcu
       It seems the stock market did not take kindly to the approval of the transaction by which "Electrica" acquires the stakes of the Proprietatea Fund in its branches, at least for now, because EL stock dropped abruptly, immediately after the general shareholder meeting of October 26th.  details
06.11.2017
     Finally, after many statements concerning the fundamental changes in the fiscal policy, announced from one day to the next and then denied, we have the argumentation note and the draft of the emergency ordinance to amend the Tax Code published, which the Ministry of Public Finance will apply starting with the beginning of next year.  details
01.11.2017
PSD SENATOR EUGEN TEODOROVICI:
     * "The MADR made a «shopping list» of projects - with local level libraries and a ferry for crossing the Danube"
     * "Within three years at most, Romania can draw 3 billion Euros in European funds"
     * "Unfortunately, Romania promotes politicians instead of promoting specialists"
       Romania has embarrassed itself with the proposals that had been initially prepared for the Juncker plan, said Eugen Teodorovici. Mr. Teodorovici is the president of the Budget and Finance Commission of the Romanian Senate, member of the European Affairs Commission and former minister of European Funds.  details
01.11.2017
ADVERTISING
     Esports, no longer the "unruly" child of the tech and sports entertainment fields, has established itself as a legitimate and profitable industry. Romanian production company PGL is at the forefront of its acceptance and growth.  details
30.10.2017
     Ludwik Sobolewski handed in his resignation.
     Wow!
     Friday, the Bucharest Stock Exchange (BVB) posted on its website the text of a "Current report":
     "The Bucharest Stock Exchange is announcing that on October 27th, 2017, Mr. Ludwik Sobolewski has notified the company about his resignation from the position of CEO of the company".  details
27.10.2017
RUMORS: THE NEW CEO OF THE BSE, SOUGHT IN THE BANKING INDUSTRY
     * Two months have passed since Sobolewski's term expired
       Even though the management of the Bucharest Stock Exchange has not been officially announced, the result of the interviews for the position of CEO held on September 25th, it seems that already a new search has been launched, which focuses on the banking sector.  details
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