Romanian Tax Man Given The Hex

by Ulrika Lomas, Tax-News.com, Brussels

07 January 2011

As the Romanian government casts the net wider in an attempt to boost tax revenue, the country's witches are busy casting spells on senior government ministers and President Basescu, cursing them for formalizing their 'profession.'

Under new legislation effective January 1, witches, along with astrologers and fortune tellers (they should have seen this one coming) and other endeavours previously outside of the purview of Romania's labour laws, are now officially classed as professions. This means that along with Romania's other self-employed trades people and artisans, they must declare their income and pay tax at 16%.

The move has been justified by the government as a serious attempt to crack down on tax evasion, but it could stir up a whole cauldron of trouble.

Romania is a country where ancient superstitions have survived into the modern day, perhaps more than in other European countries. But many witches are complaining that their income is so meagre, it is hardly worth taxing. Some are so angered by Basescu's government that they have taken to throwing poisonous plant-based concoctions into the River Danube and are threatening to cast spells on the lawmakers who voted the law through. Others, however, have welcomed official recognition of their craft by the government after years of prejudice.

The Romanian government has resisted pressure to raise its 16% flat rate of income tax, paid by both companies and individuals, despite external pressure from the IMF, which has granted the country a USD20bn loan to ease pressure on the government's budget. This helped to bring about a reduction in the government's budget deficit to 6.8% of gross domestic product in 2009, from 7.2% in 2009. But in return, the government has had to adopt a draconian austerity package including a 5% increase in value-added tax to 24% last year and a 25% cut in public sector wages. Perhaps Basescu should be enlisting the witches' help, rather than taxing them.

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