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Controversial fuel tax goes into force in Romania

Controversial fuel tax goes into force in Romania
 

By Daniel Stroe - Bucharest

Fuel prices will go up as of midnight across Romania after the enforcement of a 7 euro-cents tax introduced by the social-democrat government led by PM Victor Ponta, a measure which has pitted him against President Traian Basescu who called it “a multiple negative effects decision” which will impact the population and the economy.

In practice, the new fuel excise will translate in prices going up by 41 bani (Romanian currency subdivision), making the diesel in Romania more expensive than the one sold in Germany or France, even though salaries in the country are at least seven times lower. The government assesses it will raise about 2.5 billion lei (about 560 million Euros) annually from the new tax and initially said the money will go into building highways, even though this argument has faded in the meantime.

But the increase of fuel prices will also generate an avalanche of rise in the price of other products, especially food, since many are delivered by road transporters. A 2 per cent increase in the gas price for households also goes into effect as of midnight.

Even though he refused to back down amid a political wrangle with President Basescu on the new fuel tax, PM Ponta gave in after road transporters in Romania warned they would fuel their trucks outside the country. In a press release last month, the national Union of Road Transporters in Romania (UNTRR) warned that, if the new tax is implemented, the Romanian road transporters who deal in international trade will only fuel abroad and thus all the calculations the Romanian government has made based on the new tax would be rendered useless.

In Romania, the annual fuel consumption goes up to about 7 billion liters, of which 5 billion is diesel and the rest is gasoline, according to the communique. “By reorienting abroad a mere 13 per cent of the current diesel consumption in Romania any hypothetical gain of the Romanian state is annulled” warns UNTRR. Thus, of the total 5 billion diesel consumed in Romania reorienting 13%of the fueling abroad would incur losses of 65 Euro-cents per liter to the Romanian state.

Under these circumstances, Ponta agreed to return 4 of the 7 euro-cents transporters pay per each liter of diesel. The estimated income to the state budget will thus diminish by about 353 million lei (about 79 million Euros). A discrimination against the population and small companies, Basescu reacted today, again calling the measure abusive and an excess on the part of the PM.

The President has again today called on the PM to annul the tax and said the money can be retrieved from cutting expenses in other sectors. He also pointed out the fuel tax is only deigned to raise money for Ponta’s electoral objectives. About 300,000 people have signed a petition against enforcing the new tax and the measure is expected to incur an image deficit for PM Ponta, despite his good position in the polls.

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