Romania’s IMF agreement might continue despite deadlock over car fuel excise tax

By bne IntelliNews February 3, 2014

Romanian officials have failed to reach an agreement regarding the planned car fuel excise tax hike, but the country's arrangement with the IMF might continue without mentioning it, Adevarul daily reported. The report is based on statements made after the latest discussions on the issue in Bucharest where the Fund’s team carries out the second quarterly review of the stand-by deal sealed in the autumn 2013.

The first quarterly review was blocked by President Traian Basescu’s resistance to the car fuel excise tax hike proposed by the government.

Basescu keeps advocating against the tax hike, according to a statement of the presidential administration quoted by HotNews online news services. Yet, he would accept another three-month postponement of the tax hike for diesel and a full waiver of the tax hike for petrol – Adevarul daily reads. Such an agreement was reportedly reached between the president and the senior ruling party PSD.

Nonetheless, the daily continues, the junior ruling party PNL insists on the tax hikes as they would allow the government to cut the social security contributions by some 2-3pps as of July. This would not be likely in case the budget revenues are disappointing in the first half of 2014, while the car fuel tax hikes would increase the odds of cutting the labour taxation.

On its side, the IMF has expressed flexibility and does not insist that the government takes fiscal moves in order to meet its budget planning target, unofficial sources quoted by Adevarul daily informed. In case the revenues meet the H1 target in the absence of the car fuel tax hikes, there will be no cut on the spending side, they said.

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