2023-08-09 12:36:00
In Wednesday’s public appearance, occasioned by the presentation of the Inflation Report, BNR Governor Mugur Isărescu, a veteran who has been through all of Romania’s post-December economic crises, issued a series of warnings to the Government.
Mugur Isarescu, Governor of the National Bank of RomaniaPhoto: AGERPRES
The business environment should not be burdened with taxes. But taxes must be paid by all, with no tax privileges
What Isărescu said, verbatim:
The business environment should not be burdened with taxes. But everyone has to pay taxes. Tax benefits, if well-targeted, are for 1-3-5 years. When you exceed 15 years they are no longer privileges, they become rents that distort the market and also create problems in terms of solidarity and cohesion.
When you increase income taxation, people earn less, and demand decreases, said the Governor of the National Bank of Romania Mugur Isărescu on Wednesday, at the presentation of the Inflation Report.
Great care in the fiscal correction. If it is not enough for the country’s financiers, they will pay “whoever you least expect”. And it will also be seen on the exchange rate
What Isărescu said, verbatim:
About the fiscal correction, Isărescu warns that if it does not reach the level expected by the international institutions and the markets, the correction will be paid by “who you least expect. At country risk, we are rated above all. The correction will take place, because no more money will enter the country. We, even if we protect the price pressures now, the liquidity will disappear from the market, so the interest rates will increase. Without us moving the monetary policy rate in the slightest!
For now, nothing is clear. “We don’t know what the program will be like in the end, nor the effects of these measures to cap the commercial addition”
What Isărescu said, verbatim:
I made one thing very clear: this forecast, the inflation outlook is influenced by uncertainties. We do not know what the program will be like in the end, nor the effects of these measures to cap the commercial addition.
But if this fiscal consolidation is not done well, we don’t even get to go to the International Monetary Fund to sign an agreement, that they correct our markets first.
The Romanians will not stay minimal. They want lower taxes
What Isărescu said, verbatim:
There is this illusion with the minimal state. “The Romanians will stay minimal”. (The Romanians…) will not stay minimal. They want lower taxes than in any country.
Romanians want a state like outside with highways, education, hospitals. They are expensive public services, which (all the time…) have been undervalued. How to make a minimal state with 27% GDP income? We have to recover. If we don’t recover, a market correction will come and throw a bucket of cold water on our heads.
Reduce evasion and simplify the tax system
What Isărescu said, verbatim:
“There is evasion”. Well, when you have so many tax exemptions, how can there be no evasion? It’s called tax optimization, right? They are accepted for so many years. “It was a story, Creangă’s, right? With that man who was trying to scoop water. You have a tax system with so many exceptions, you don’t have good collection and you blame ANAF and whoever else you want. We need to simplify the tax system. This is the Government’s job,” Isărescu said.
If the state institutions are to function properly, they should not be “raised” every day with reforms
He specified that the institution he leads supports the Government in finding solutions, but it is the decision of the Executive regarding the reform of the state apparatus, not of the BNR.
What Isărescu said, verbatim:
“It is a political decision. Is not easy. As business people say: we want predictability, we want to be able to look into the future, and so do state institutions, if we want them to function as they should, we don’t have to keep upsetting them every day, with reforms. It’s hard work here. It’s a political decision. I did a reform in 2000 and I know what it’s like. Romania’s problem is much more serious from a fiscal point of view than is being discussed in bits and pieces. Why? Because they say: we want a country like outside. We want quality public services, we want highways, we want quality schools, we want quality hospitals and health. And if you add all these requirements, you reach 40-50 percent of GDP. I was prime minister, I sat at the table also in a coalition government, the demands were 40%. And I had to solve the problem. 40% to cover them with only 32%. Let it be. But how are they more than 40% and we want to cover them with 27% of revenues. Hard work. That is why we support the Government to find solutions. It is the Government’s decision, not ours,” Mugur Isărescu said.
From the conference see also:
VIDEO Isărescu: When you increase income taxation, people earn less and demand decreases / If the fiscal correction will not satisfy the international institutions, it will be paid by “whoever expects the least”
Why can’t the salaries in the BNR be reduced / Isărescu: We can’t lower the salaries of the specialists in the BNR below what other central banks offer
Isărescu: When fiscal privileges exceed 15 years they become annuities / I understand that some want life annuities. That’s not possible
Mugur Isărescu: Romania’s problem is much more serious from a fiscal point of view / They say: “We want a country like the outside” / If you add up all the requirements, you reach 40-50% of GDP
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