The hike of the flat tax rate is the last and worst solution for plugging the budget deficit, and the Romanian government and the IMF officials are all aware of it, just as they perform the quarterly evaluation process for the release of the fifth tranche of the loan of EUR 850 million.
Over the last three days, the press has been claiming that the raise of VAT and taxes was a given, probably because they are under the mistaken impression that the process of evaluating Romania"s economic results in the last quarter is actually a "negotiation".
In fact, yesterday, the two parties had not yet reached a consensus on the size of the budget deficit. The Romanian authorities propose a worst-case figure 4 billion lei lower than the one requested by the IMF.
A good enough reason for the IMF mission to extend its stay here by another two days (as announced yesterday).
At the time, any hike of taxes and/or of the income tax was pure media speculation.
After they agreed on the deviation from the criteria negotiated in the loan agreement, the two parties will begin to assess the available solutions, taking into account the need to protect the business environment, meaning the hiking of the profit tax would be the option of last resort.
The first solution, is the option of taking out a new foreign loan, and yesterday"s news, announced that the International Monetary Fund, would approve the increase of the allowed budget deficit goal, which opens up the door for such a solution, for the moment.
The second solution being considered, would be a reduction in public spending, and it was announced in the news yesterday that both parties agreed on the layoffs in the public sector, but the number of layoffs was not announced.
And at last, increasing state budget receipts is the last option on the list, but this is also dominated by the prot
