Romania Presses on With Controversial Fuel Tax

Romanian Prime Minister Victor Ponta has said his centre-left government will not revoke a controversial fuel tax coming into force on April 1, but promised compensatory measures.

“The measure will help ‘fair' transporters, without a history of tax evasion, who will be able to recover most of the costs [of the new tax],” Ponta said, without offering further details.

The new fuel tax is set at seven cents a litre. Its adoption was important in talks with the IMF, which set it as a condition for granting a 2-billion-euro precautionary loan.

It has caused an intense political debate. In December, President Traian Basescu said he would not sign the letter of intent with the IMF if the government introduced the duty. After Ponta offered to delay the tax by three months, the President backed down.

Basescu is still against the new tax, however. On Tuesday, he again urged Prime Minister Ponta to revoke the tax, describing it as putting “exaggerated and pointless pressure on the economic environment and on consumers".

Analysts say the new tax will push up prices and inflation and lower consumption, while many small and medium-sized companies may have to cease trading altogether.

But Finance Minister Ioana Petrescu recently said that without the income from the new tax, budget payments, pensions and public sector salaries were at risk.

The government and President have a long history of disputes, which culminated in a referendum on the impeachment of Basescu last July.