Romania surprises energy companies with new tax

Romania surprises energy companies with new tax

Romania surprises energy companies with new tax

/ Financial News / Wednesday, 02 January 2019 11:48

Romania's left-wing government issued a controversial emergency ordinance imposing new taxes on banks and energy companies, despite an outcry from investors.

The package of taxes and price caps sparked a big sell-off on the Bucharest stock market, following a government announcement, although the measures adopted were less strict than the original proposals.

“We are adopting a new set of measures to increase the well-being of Romanians, the level of investment and to correct some unfair practices in the energy and banking sectors”, Prime Minister Viorica Dancila said at a cabinet meeting which pushed the measures through.

The government has introduced the measures in a bid to keep its budget deficit below the EU-mandated target of three percent of gross domestic product (GDP), but businesses complained of a lack of prior consultation.

Romania is one of the fastest-growing economies in the European Union but moves this year to raise public sector wages and pensions, combined with tax cuts, have depleted its coffers.

Under the new rules there will be a levy on bank assets if interbank lending rates exceed two percent, in what the government has dubbed a “tax on greed”.

Also, energy companies will face a two percent tax on turnover.

Gas and electricity prices will be capped for the next three years for domestic consumers but only for some industrial consumers, not all as in the original proposals.

Austrian Chancellor Sebastian Kurz used a visit to Bucharest to criticize the plans.

Foreign companies with a presence in Romania, including Austrian oil major OMV, could be affected by the measures.

“I am not worried about Austrian companies. They could pack up and leave, so I'm not worried for them, but for Romania's economy”, Kurz said, adding the taxes could deter investment and harm growth.

Investors' groups have also urged the government not to adopt the new measures, saying they could trigger an “economic crisis”.

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