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The Week in Review: July 2-8

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Corina Cristea, 08.07.2017, 14:00

Decisions taken by Romanias Supreme Defence Council

Romanias Supreme Defence Council has met this week for the first time since the new left of centre government headed by Mihai Tudose took office. Romania wants to take part in the European Union security and defence strategy, President Klaus Iohannis said after the meeting. According to President Iohannis, who chaired the meeting, in the first phase the strategy focuses on military research, to see how Europes defence industry can be improved and how national armies can cooperate closer. On the other hand, the Council approved the increase in the maximum number of troops that can be deployed for missions outside Romania.

President Iohannis explains: “The number of available troops has been raised to 1,793 for the Defence Ministry and 971 for the Interior Ministry, both military and civilian staff, who can be deployed to foreign missions. This is the cap we set, although the actual numbers at present are lower, and will unlikely reach the cap by 2018. But weve all seen how fast things can change, and we want to make sure we have a comfortable margin we can rely on if need be in order to supplement our troops for these missions.

The national modernisation program for the 2017-2026 period was withdrawn from the meetings agenda, as the document did not provide for the allocation of 2% of Romanias GDP to defence spending over the next ten years at least, as stipulated by an agreement signed by parliamentary parties several months ago. The Supreme Defence Council also analysed a report of the Interior Ministry regarding illegal migration. According to President Iohannis, Romania will have to deal with this issue over a long period of time, as there is no sign the situation will change any time soon.

The Three Seas Initiative Summit

In 2018, Romania will host the summit of the Three Seas Initiative, which seeks to achieve the economic interconnection of the countries bordering the Adriatic, Baltic and Black Seas. The decision was taken on Thursday in Warsaw at this years summit, where Romania was represented by president Klaus Iohannis. He was among 12 leaders of central and east-European states to attend the summit. Talks focused on economic issues and security and were also attended by the US president Donald Trump as a special guest. Klaus Iohannis gave assurances that Bucharest would continue to be an active supporter of the transatlantic relationship, which he sees as vital and the backbone of western civilisation. In the opinion of the Romanian president, the presence of the White House leaders in Warsaw demonstrates Washingtons commitment to the security and prosperity of the entire Europe. In an 8-minute speech, Trump hailed the Initiatives actions to ensure energy security and promised his countrys help for its projects.

The new governing programme introduces new taxes

The new programme of the ruling coalition made up of the Social Democratic Party and the Alliance of Liberals and Democrats stipulates that Romanian businesses are to pay their taxes based on their turnover rather than their profit. This measure is expected to come into force on 1st of January 2018. Big companies will no longer pay a 16% flat tax, as is currently the case, but a 1, 2 or 3% income tax. Experts, however, say the measure would be disastrous for the business environment and generate a wave of negative consequences. Moreover, they warn that the application of differentiated turnover tax may lead to competitive discrepancies between different countries that will affect the cost of end products, with Romania thus risking the activation of an infringement procedure against it.

According to an analysis carried out by the Association of Financial and Banking Analysts in Romania, the effects of a possible turnover tax will be a heavy burden for most businesses in Romania, particularly those with incomes in excess of 1 million euros, 60% of which are with foreign capital. Prime minister Mihai Tudose is reportedly in favour of the turnover tax, provided it is levied gradually and only on certain types of businesses, government sources have said. The same sources say the prime minister is waiting for the result of the simulations conducted by the finance ministry before making a decision. In the meantime, the US Ambassador to Romania, Hans Klemm, had a meeting with the Chamber of Deputies Speaker and leader of the Social Democratic Party, Liviu Dragnea, on which occasion he said the Romanian Government had to send positive signals to American and other foreign investors. Dragnea gave assurances that no article in the Fiscal Code likely to have negative effects on the business environment would be passed.