Wednesday, November 3, 2010

AP: Romanian president rejects law reducing sales tax

A top adviser in economically struggling Romania warned Tuesday that a further 50,000 public employees would lose their jobs next year, as the country's president said he would reject a new law slashing the sales tax on food, a bill lawmakers say they enacted by mistake.

President Traian Basescu said he would return the tax legislation to Parliament, because Romania needed predictability in its tax system to help its reputation abroad.

The current tax on food, which parliament voted to cut by 80 percent, and the tax on pensions, for which parliament voted to reduce the taxable portion, would not be changed, Basescu said. The changes cannot become law without his signature.

Last month, Romanian lawmakers approved cutting the sales tax from 24 percent to 5 percent. Some said the error occurred because some not all lawmakers bothered to read the proposal, which was submitted by the opposition.

On Monday, the International Monetary Fund urged Romania to not change its fiscal system for at least two years.

Romania took a euro20 billion loan from the fund, the European Union and the World Bank in 2009 and has in return begun instituting strict austerity measures, including laying off more than 36,000 public employees in the last year.

Basescu said Romania would start negotiations in January regarding a new financial agreement.

The country will lay off a further 50,000 public workers by the end of the year, said Andreea Paul Vass, adviser to Prime Minister Emil Boc on Tuesday. Romania has about 1.36 million public sector workers, which it has pledged to reduce to 1.29 million.

It has not made a specific timetable public.

In July, the government cut public wages and increased sales tax from 19 to 24 percent.

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