Fiscal & Political Report

Written by Ana-Maria Anghel & Cezar Petrescu

Political Updates

Internal Affairs

ALLIANCE OF THE RIGHT-WING PARTIES? Although it seemed that the future of Romania's governance was in the foreground of the current PSD-PNL Coalition, it seems that the liberals are increasingly considering a possible alliance with the rest of the right-wing parties. PNL leader Nicolae Ciuc? recently expressed his desire for a common right-wing political project for the parliamentary and presidential elections at the end of this year. In this context, a governance with the right-wing parties would come first in the plans of Nicolae Ciuc?, before the coalition with PSD. “We have opened the dialogue for a gathering of right-wing political forces (...) The intention is to have a right-wing government”, declared the liberal leader. A surprising statement to say the least given this year’s statement of the political figures in the Coalition, which showed that this PSD-PNL alliance is destined to be resumed even after the parliamentary elections in December. Although we have no information on massive divergences in the Coalition, it is possible that several hot topics on the agenda of the two parties have dug deep into their political relationship - whether we are talking about the future European commissioners, the single quota vs. progressive taxation.

Beyond an electoral alliance and possibly a governing one, the plan of the PNL leader is sketched around a prime minister - president tandem, but without having a clear name regarding the person who would lead the executive power. This is because Nicolae Ciuc?, the PNL candidate in the presidential elections, is already seeing himself occupy the seat at Cotroceni Palace. In the case of winning this mandate and forming an alliance of right-wing parties with a majority in Parliament, Nicolae Ciuc? should appoint a prime minister who is not liberal but rather from the rest of the right-wing parties. In this scenario, USR leader Elena Lasconi would be an option, and PNL is considering requesting her for support for Nicolae Ciuc? in the presidential elections, according to liberal vice-president Rare? Bogdan. The main problem for the PNL is now the scenario given by the electoral polls.

For example, the CURS poll on Romanians' voting intention for the presidential elections shows Marcel Ciolacu (PSD) as the winner - 33% of votes, Nicolae Ciuc? in second place - 23%, and in third place, in a tie, are the Deputy Secretary General of NATO, Mircea Geoan? (independent), and AUR leader George Simion – 15%. This would mean, for PNL, either a president-prime minister tandem, in which Nicolae Ciuc? would be the head of the Government and Marcel Ciolacu the president of Romania, thus continuing the alliance with the PSD, or an alliance between PNL and the right-wing parties. In this last case, PNL would once again arrive at Victoria Palace, although the social democrats would enjoy the presidency. However, according to the political history after former president Ion Iliescu, PSD failed to win the presidential elections, always losing to the right-wing parties (in the second round of voting). But until the presidential elections in November - December, many things can happen to upset the current polls and hijack these plans.

External Affairs

INFRINGEMENT PROCEDURE FOR ROMANIA. The authorities from Bucharest had quite the surprise this week when the European Commission decided to open an infringement procedure against Romania for failing to meet waste collection and recycling targets. No less than 19 countries did not meet 50% target for 2020 of preparing for reuse and recycling of municipal waste (such as paper, metal, plastic and glass). The established recycling goals for various materials include 60% for glass, 60% for paper and cardboard, 50% for metals, 22.5% for plastics, and 15% for wood but many of these targets were missed. Subsequently, most member states, including Romania, failed to collect sufficient WEEE separately and therefore missed the EU collection target – the collection rate to be achieved annually was 65% of the average weight of electrical and electronic equipment placed on the market in the three preceding years, or alternatively 85% of WEEE generated on the national territory. Therefore, as the Commission announced, Romania shall boost its implementation efforts in order to meet the abovementioned obligations, as this would help to meet the forthcoming targets of 2025, 2030 and 2035, established by the recent amendments of the EU waste legislation. Thus, after receiving the formal notice from the Commission, the national authorities have two months to respond and address the shortcomings raised by the Commission. If not, the Commission may decide to issue reasoned opinions.

Fiscal and Economic Updates

Overview

PERSONAL IDENTIFICATION NUMBER. The Ministry of Finance is proposing a public debate on a draft emergency ordinance that suggests the use of a digital identification number by individuals as an alternative to the personal identification number (CNP) for the proper functioning of digital systems that require the use of the CNP. This means individuals can choose to verify their identity with the tax authorities using the digital identification number instead of the CNP. The draft normative act also includes simplified procedures for installment payments, including for tax obligations withheld at the source, under certain conditions. It proposes the possibility of paying tax obligations into budget revenue accounts specific to each type of tax obligation. Additionally, the act aims to establish easier electronic communication methods with the legal or designated representatives of the business environment for periodic updates on the fiscal situation and measures to strengthen financial discipline regarding cash transactions for debtors with bank account garnishments. Thus, taxpayers who have public debts and garnishment on their accounts could have limitations on their cash transactions until their debts towards the state budget are paid. The thresholds are up to RON 5,000 for large taxpayers, RON 2,500 for medium-sized taxpayers and RON 1,000 for small taxpayers.

PM CIOLACU GUARANTEES NO NEW TAXES. Prime Minister Marcel Ciolacu came out again this week to emphasize once more that the press speculation about the increase in dividend tax from 8% to 10% and the elimination of facilities in the construction sector are false. He emphasizes that the Government has not discussed or prepared any legislative package that would include those speculations, and that such decisions will be taken only after a consensus within the governing coalition and the Government. Finally, Ciolacu says he suggested to the finance minister that any decision taken in the tax area should be made only after prior consultation with business and civil society.

EU EXCESSIVE DEFICIT PROCEDURE CONTINUES. The EU Council has decided that Romania has not taken appropriate measures to correct the widening budget deficit problem over the last four years, which means that the excessive deficit procedure remains applicable, in accordance with the budgetary and fiscal obligations set out in the Stability and Growth Pact. We recall that among the basic criteria provided in the text of the Pact, we find two important aspects, namely that the deficit should not exceed 3% of GDP and that the public debt should not exceed 60% of GDP. Towards the end of the year, the Council, on the recommendation of the Commission, will be asked to adopt recommendations to Member States to take effective action to correct their deficits within a given timeframe. The Commission is expected to present the Council's recommendations around November, around the same time as it intends to present the autumn package of the European Semester.

On the Recovery Plan

EXTENDING PROCUREMENT CONTRACTS. The government adopted an Ordinance that regulates certain measures for extending public procurement and/or sectorial contracts, and framework agreements that have their financial sources partially or fully ensured by Romania's National Recovery and Resilience Plan (NRRP), as a result of the extension of the associated financing contracts. The extension of the contracts applies only if the following unpredictability conditions are cumulatively met: (1) the change in conditions on which the contract duration was based occurred after the deadline for submitting bids and (2) the mentioned change could not have been foreseen by the contracting parties at the time of initiating the awarding procedure or at the time of drafting the bid. This ordinance applies to public procurement and/or sectorial contracts, and framework agreements concluded after its entry into force and correspondingly in the case of modifications to their documents, that are ongoing at the time of its entry into force.

Issue Monitoring provides companies and business associations with real time alerts and periodic reports on various policies that are under debate in Parliament, Government or Authorities. The monitoring includes the entire legislative life cycle of draft bills, relevant news in mass media and stakeholders’ profiles. For an in-depth monitoring, experts are present at public debates and industry events, providing a detailed synthesis of discussions.

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