Where will budget revenues come from in 2009?

 

These macroeconomic indicators include revenues (32.1 percent), expenses (34.1 percent), budget deficit (2 percent of gross domestic product), economic increase (2.5 percent of GDP), inflation (5 percent), unemployment (5.5 percent), and the exchange rate (RON 4/€1).

“The Fund’s main concern is how the government will meet these targets. Major question marks focus on maintaining the budget deficit below two percent of GDP and obtaining revenues of 32.1 percent of GDP,” quoted sources told Business Standard.

These same sources indicated that the European Commission (EC) and the IMF recently signed a collaboration agreement to offer loans to countries which need external financing to exit the crisis. President Traian Basescu said Tuesday that Romania has already notified the EC that it intends to take out a €6-7 billion loan, under IMF supervision.

According to the analysis, a 32.1 percent share of GDP in revenues will be a real challenge for the government headed by Prime Minister Emil Boc. This portion is too optimistic considering current crisis conditions, when company profits will plunge or even disappear.

Tax advisors indicated that an increasing number of companies are consulting specialists to find ways to cut payment of taxes to the state.

“Revenues from income tax will drop mainly due to the significant rise in the number of unemployed,” Gabriel Biris, Tax Attorney, told Business Standard. According to Biris, more companies will seek ways of paying salaries without declaring part of or all of these payments, considering the sharp liquidity shortage. “However, only 50,000 salaries over RON 6,000 are declared in Romania, and the main negative effect on budget revenues is the unemployment rate,” Biris said.

Revenues from the income tax amounted to some 25 percent of the state budget in 2008, which translates to some RON 17 billion (€4.01 bln) of the total RON 67 bln (€15.8 bln). However, Biris said these revenues will drop in 2009 below half of last year’s level.

The EC recommends that Romania continue to implement structural reforms, particularly in terms of efficiency and independence of central and local administration, and a stricter fiscal policy for a narrowing of the current account deficit and a lowering of inflation, quotes the Mediafax news agency. “In the current economic context, Romania’s main priority should be to reduce macroeconomic and fiscal imbalances,” the statement indicated.