The Romanian government announced on Tuesday that the International Monetary Fund has approved tax reforms that have ushered in a radical new flat tax.
A statement released by Prime Minister Calin Popescu Tariceanu following a meeting with IMF representative Graeme Justice revealed that the fund viewed the tax changes as “good fiscal policy”.
However, the IMF reportedly warned that Romania will have to tread carefully in order not to exacerbate its budget deficit.
The reforms, the result of an emergency government decree in late December, and introduced on January 1, replaced the multi-tier personal income tax system and the 25% corporate tax with a single flat tax levied at 16%.
The new centrist government of Tariceanu is hopeful that the tax cuts will attract foreign investment and smooth the path towards entry into the European Union.
"The burdening fiscal policy which was in effect (is what) has stopped Romanian companies from gaining capital and becoming competitive on foreign markets," the Prime Minister stated.
“We want, in the next years, the Romanian economy to become stronger and to capitalize itself, so that it can face the competition once we enter the European Union,” he added.
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