Liberalization, Romanian style: the state expropriates it all

So, the Government came up with the idea to introduce an additional tax for “windfall profits” resulting from liberalization of the gas and electricity markets. That is, prices will increase during the liberalization of the energy market, companies (public and private) will get additional revenue, and this top-up income will be taxed more. The idea is not bad, it was actually Jeff Franks who came up with it when seeing the government would rather hang itself than liberalize the energy market and give us consumers the option to switch suppliers, no matter how much EU infringements and sanctions we get for not liberalizing the market once and for all. But nobody ever thought that the state would grab it all; the extra money was supposed to be split between companies and the state, so that the state has money for social support of poor consumers, whereas companies (I repeat, public and private) have money for investments. In other words, the point was to allow the energy market to really start behaving like a market. There were discussions with experts this spring on how gas (and oil) is taxed in other countries, so as to attract investment, but also attain a decent balance public and private, blabla, you know, all that sort of nonsense for which our busy politicians do not have time.

Now the Romanian state, in the infinite wisdom of financial genius Georgescu, nicknamed Mister Inflation in the 90s, decided to put a 100% tax on the additional income. (I said it before –  the reason Isarescu was happy when Georgescu was appointed Minister of Finance Georgescu was that he finally got rid of the guy from the NBR, not because he got a brilliant counterpart in the Finance ministry).

coming back to the issue, MF says that any additional income resulting from liberalization is entirely nationalized. That means, zero interest for investment, in fact, for producers there’s no reason why they should not keep prices unchanged as if there was no liberalization. Sure, the producers might increase the price if they want to screw over the consumer and make it pay more to the state.


PS1: the law, not published yet, would be applied from 1 December 2012, now that’s the spirit for fiscal predictability.

PS2: how much would you bet the Government would apply some fiscal deductions for some you-know-who-select-companies?

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