Romanian prime minister Ilie Bolojan submitted on September 1 the second package of reforms in the form of five separate draft laws, covering the magistrates’ pensions, the management in state-owned enterprises (SOEs), the market regulators, the public health system, and the taxation regime, to Parliament for endorsement under accelerated procedure without further debates.
The procedure gives the opposition the chance to file non-confidence motions against the government for each of the five draft laws, which is likely to happen for four of the five bills, with the fifth (on magistrate pensions) probably referred by magistrates to the Constitutional Court.
The government, on September 1, accepted several amendments filed by political parties to the draft laws as approved on August 29.
Among the most important amendments, the minimum tax on turnover (IMCA), supposed to be replaced by the limited deductibility of a category of expenditures with foreign affiliates, was maintained in parallel with the measure supposed to replace it.
However, while IMCA (1% tax on turnover in case the 16% profit tax is smaller) will be levied against companies with a turnover larger than EUR 50 million, the limited deductibility (up to 1% of total expenditures) of the expenditures with affiliates in three categories (management, consultancy, intellectual properties) will be levied against the companies with turnover below EUR 50 million.
Besides the mandatory capitalisation of the loans from shareholders and investors to companies with negative financial performances, maintaining both provisions on multinational taxation has been severely criticised by the business community.
Another amendment proposed by the Social Democratic Party (PSD) and accepted by the government regards the tougher taxation of the gains generated by trading cryptocurrencies (from 10% to 16%) and higher taxation of expensive automobiles and properties.
Separately, the existing company will not have to increase its minimum equity capital until it reaches a certain threshold (RON 400,000 or EUR 80,000). At that point, they will have to increase their equity capital to RON 5,000 (some EUR 1,000). The new companies set up in the future will have a minimum equity capital of RON 500 instead of the RON 200 threshold used in the past.
Among the other important provisions in the taxation draft law, the capital gains generated by investments in the equity market will triple from 1% to 3% for long-term investments (for assets held more than one year) and will double from 2% to 6% for assets held for less than a year. Charging this higher tax per asset instead of per portfolio (namely on the aggregated capital gain) prompted criticism from associations of investors.
The draft law on SOEs management aims at smaller boards and less generous, performance-based bonuses for board members. At the same time, the recruitment and evaluation procedures for the SOEs’ management are tightened.
A similar process is envisioned under a third law for the market regulating bodies in the areas of energy, financial institutions, and telecommunications (ANRE, ASF, and ANCOM). Furthermore, the staff of these institutions will be cut by 10% (expert positions) and 30% (support positions).
The three institutions will have two months to initiate the changes. The employees of these institutions already initiated mild forms of protest, warning against “the decrease in the quality of services provided” following the changes.
In the healthcare sector, the heads of departments, laboratories, and medical services will conclude a 4-year management contract with the public hospital, which includes performance indicators. The family doctors will be paid more for the services provided and less per registered patient. The number of beds in hospitals will decrease with more funds given to outpatient services.
The draft law on magistrates’ pensions envisages pensions no higher than 70% of the latest net wage, calculated based on the average wage earned in the past five years. The retirement age rises to the normal retirement age for other employees gradually, within ten years.
As a common principle for the SOEs board members and top management members, and the pension rights of magistrates, those enjoying certain rights (pension rights for magistrates and management contracts for SOEs) will hold their rights. This is aimed at avoiding legal complications, but severely weakens the provisions approved by the government under the respective draft laws.
iulian@romania-insider.com
(Photo source: Inquam Photos / Codrin Unici)
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