Romania Tries to Sell Tax Cuts to IMF Visitors

A joint IMF and European Commission delegation held its first talks with Bucharest officials on Tuesday over Romania's proposal to change the fiscal code and boost disposable income and get people spending more.

The discussions, due to end on May 26, will focus also on the need for a new deal with the international lenders.

"We want to successfully end the curent agreement with the IMF and the EC [the Commission]and then opt for a more relaxed one according to the Polish model," Finance Minister Eugen Teodorovici said ahead of the negotiations.

Romania has an ongoing precautionary standby deal worth about 2 billion euro. Approved in September 2013, it expires in September this year.

In February, the two sides failed to sign a letter of intent, without which Romania cannot draw on the IMF's funds in an emergency, as they have failed to agree on several issues.

Romania's centre-left government plans to reduce taxes, including cutting VAT from 24 to 20 per cent, and reducing taxes on meat, fish, vegetables and fruit to 9 per cent from January.

The flat tax on income and profit will go up in 2019, however, from 14 from 16 per cent.

The planned new code also scraps the tax on dividends starting from January 2016, lowers taxes on active micro-enterprises and cuts the excise duties on fuel and alcohol, among other things.

International lenders do not support the plan, however, saying that the government risks failing to raise enough money to compensate for the tax cuts.

The government is likely to make a final decision on the changes to VAT after talks with the International Monetary Fund and the European Commission ends.

The 2013 loan was the third accord signed with international lenders since 2009, when...