European Interest

International development banks slam Romania’s tax plans

Flickr/International Monetary Fund/CC BY-NC-ND 2.0
Mugur Isarescu, Governor of the National Bank of Romania is introducing IMF Christine Lagarde (R) before she gives a speech at National Bank of Romania, July 16, 2013.

The Romanian government has received two complaints about its proposed new banking sector taxes. The first came from the European Bank for Reconstruction and Development and the second is from the International Finance Corporation.

The London-based EBRD and IFC, which is part of the World Bank, sent a joint letter to Bucharest on February 1 in which they outlined their concerns about the plans.

As reported by the Reuters news agency, the EBRD has a number of large stakes in Romanian banks and the country’s central bank governor, Mugur Isarescu, cited the EBRD’s complaint on February 11 as he delivered a second stinging attack on the plans in a less than a week.

“Those from the EBRD have a major problem, because in the case of Banca Transilvania for example, dozens if not tens of dozens of smaller foreign shareholders bought in based on their credibility. When they saw what happened on the stock exchange, they started asking questions of those who … promoted the idea that Romania has a stable, responsible, predictable, reasonable legislation.”

An EBRD spokesman said: “We confirm that we sent a letter together with the IFC on 1 February.”

“We are not discussing the contents of our correspondence with the authorities in public and have no further comment at this stage.”

The tax proposals, which also increased taxes on energy firms to compensate for rising state spending, sent Romania’s stock market tumbling and the country’s currency.

According to Reuters, analysts say they could make banks unprofitable and they have also drawn particular criticism for a complex mechanism which ties them to Romanian money market rates.

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