PSD and PNL publicly challenged each other on Thursday to publicly explain why they support or reject the new tax changes. On Thursday, the Social Democrats, through an official statement, asked the PNL partners to define their position on the solidarity tax. In response, the Liberals also responded with a press release that “increasing the tax regime will strangle the real economy and drive away investors.”

“PSD asks colleagues from PNL to define their position on the solidarity tax that applies to companies with high and very high incomes. Whether they support this tax or against it is not clear. Some prominent PNL leaders strongly demanded the application of a European-level solidarity tax to some large companies in Romania’s energy sector. Others, on the other hand, are equally critical of the solidarity tax, believing that it will affect the business environment and raise prices for end consumers. Colleagues from the PNL must explain why the solidarity tax is good when the PNL demands it, but it is no longer good when the PSD proposes it,” the social democrats said in an official statement.

PSD asks the liberals to explain to citizens why some companies artificially reduce their profits

The PSD also says that “those from the PNL must clearly tell citizens whether they accept the behavior of companies with very high revenues that reduce their obligations to the state by artificially reducing profits.”

The PSD, in support of the promotion of the solidarity tax, claims that “there are many Romanian companies that report real profits and pay taxes that exceed 3-4% of their turnover.”

“Now there are many Romanian companies that report real profits and pay taxes, the value of which exceeds 3-4% of their turnover. In addition, the solidarity tax supported by the PSD is aimed primarily at companies that have increased their revenues by speculatively raising some prices in the current inflationary context. Contrary to the criticism of some PNL leaders, the solidarity tax prevents this speculative behavior, which has unduly affected the purchasing power of Romanian citizens,” the social democrats claim.

The PNL’s answer: they should avoid the temptation to introduce fiscal measures that suit a certain category of voters

For their part, the Liberals responded to coalition partners also in a press release that their position on excessive corporate taxation “remains very clear and firm”, namely that they do not support raising or introducing new fees or taxes that would put the burden on the shoulders of an economic environment that is already facing challenges due to a complex global context.

“We do not support raising or introducing new fees or taxes that would burden an economic environment that is already facing challenges due to a difficult global context. Increasing the tax regime will stifle the real economy and drive away investors, something the PNL cannot accept. In fact, the entire coalition (including the PSD) has pledged not to introduce any new taxes or raise existing ones this year. The year 2023 has already started with a revised Fiscal Code, through measures to balance taxation and eliminate some inequalities in the system, a Fiscal Code that was agreed by all three parties in the government coalition,” says the PNL.

The Liberals emphasize that “parties must avoid the temptation to introduce fiscal measures that benefit a certain type of electorate but risk undermining fiscal stability.”

“The introduction of a tax of 1% of turnover for large companies means a cascading increase in the prices of products and services, which will affect all Romanians (…) Romania has a stable, predictable and attractive fiscal system for investors. This is evidenced by last year’s macroeconomic indicators, which show that we attracted foreign direct investment at a record level: 11.3 billion euros (according to the BNR estimate). GDP grew by 4.9% (estimated by the National Forecasting Commission), the economy exceeded expectations (initial estimate was 4.6%). Romanian exports amounted to 85 billion euros (for the first 11 months of 2022). These preliminary values ​​will be confirmed by the final values ​​that will be published by the INS,” states PNL.

The exchange of press releases between the two ruling parties in the coalition comes in the context of PSD President Marcel Čolaku announcing that he wants to propose a solidarity tax of 1% on profits for large companies in the coalition.

Some PNL leaders reacted to PSD’s public proposal and said that they do not support the new tax increase because the business environment in Romania needs “predictability”.

The exchange of remarks comes amid the upcoming government reshuffle, which is due to take place at the end of May, when the PSD will take over as prime minister.