In promising to retain the flat tax, Basescu is speaking in the name of the Government and Parliament, the institutions which are normally responsible for such a decision. A similar situation cost U.S. President George Bush his second term.
“Read my lips: no new taxes!” was the message that helped Bush win the 1988 elections, while two years later, he was forced to raise taxes due to the unsustainable budget deficit, pressured by the Democratic majority in Congress. “Read my lips: I lied,” was the New York Post headline the following day. Bush’s popularity began sliding, and in 1992 he lost the elections to Bill Clinton.
“We are not considering tax increases, and a rise in the flat tax or VAT [value-added tax] should normally be announced six months before,” said Dragos Doros, Head of the Legislation and Direct Taxes Department of the Ministry of Public Finance.
But budgetary pressures have forced the Executive into a situation of opting for one of the two alternatives: lay off more staff than initially announced or significantly raising budget revenues. “Romania needs a fiscal policy that will deliver the necessary reduction in the budget deficit to a level that can be safely financed. How this is achieved clearly is up to the elected politicians. But it seems to me that some tightening would be needed to secure the 7.3 percent target,” Fitch analyst Andrew Colquhoun told Business Standard.
