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| SALARY CUT AND TAX RISES 01/07/2010 |
| (2010-07-01) |
| Last updated: 2010-07-02 20:45 EET |
As a result of this measure, Romanians will pay more for everything, from household appliances to food, fuel and cigarettes. Food industry associations believe that apart from leading to an increase in the price of food products by 5 to 7%, the VAT rise will also counteract the measures taken to combat tax evasion and will encourage the black market. Employers’ associations say private companies are faced with two options: either increase prices or make redundancies.
Prime minister Emil Boc said the VAT rise does not apply to the building of social houses, medicines and newspapers and magazines. The VAT rate for constructions is 5%, while the rate for medicines and written press stands at 9%. To obtain additional revenues and be bale to make current payments, the government has adopted a set of new regulations.
For example, persons who own more than one apartment or house will pay, between July 1st and December 31st 2010, an additional tax of 65% on their second property, 150% on the third and 300 on the fourth. The tax on vehicles with a cylinder capacity of more than 2,000 cubic cm has been doubled. The government has also decided to downsize the staff in the central and local administration. Over 53,000 people will be laid off as a result.
Interior minister Vasile Blaga said this measure saves the state budget a lot of money. A 26% staff reduction leads to a 29% cut in expenses, explained the minister. Blaga said the police would cut over 10,000 jobs. He said the downsizing of the administration staff is also necessary because 2,500 of Romania’s 3,200 administrative departments used funds from the central budget at the end of last year because they did not manage to cover salaries based solely on local taxes and fees.
Apart from higher taxes, July 1st also sees the implementation of the 25% cut in public employees salaries, a measure that remains in place until December 31st 2010. The president of the Cartel Alfa trade union confederation Bogdan Hossu said the salaries of state employees will be reduced, in effect, by 30 to 32%, if you add to the 25% cut the VAT rise and other corrections resulting from the enforcement of the new regulations.
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