An International Monetary Fund official has urged Romania not to reduce its income tax from 16 percent to 10 percent, warning that could jeopardize the country's international loan agreement.
IMF mission chief Jeffrey Franks said Wednesday the Senate's vote to reduce the fixed income tax rate paid by all wage earners would increase the budget deficit agreed for 2011. The other house of Romania's Parliament, the Chamber of Deputies, hasn't voted on the bill yet.
Frank said tinkering with the tax system would create "instability," and he urged the government to stick to the agreed budget deficit of 4.4 percent of the GDP.
Last year, Romania took a euro20 billion loan from the IMF, the EU and the World Bank, to shore up its ailing economy, which shrank by 7.1 percent in 2009.