Government threatens banks with overtaxation

Publish date: 19-05-2009
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The government headed by Democratic-Liberal Prime Minister Emil Boc is threatening bankers with overtaxation if they withdraw financing lines granted to their local subsidiaries, but representatives of the National Bank of Romania (BNR) are calming spirits by saying that such a "Robin Hood" penalty will not be applied.

Yesterday, bankers leading the largest lenders on the local market were in talks, in Brussels, with representatives of the International Monetary Fund (IMF) and of the European Commission (EC) regarding the increase in share capital and providing funds for their Romanian businesses.

Contacted by Business Standard, BNR officials said that over taxation would only speed up the exit of capitals from Romania.

"This is not possible. The market is based on anticipations, and if you let the market see you are intending to take such measures, it is not good. Such a measure could accelerate exactly the effect you are trying to stop," BNR officials who declined to have their name published said.Bankers said that the government's measure will not stimulate local operations, especially since lenders posted a total loss worth €50 million in the first quarter of 2009.

"In a free economy, flows are entering and exiting, either if we are talking about investments or loans. I do not think that penalties or restrictive measures are capable to stimulate banks to keep their money in Romania, it's the opposite. The advantages are more important," said the General Manager of ING Bank Romania, Misu Negritoiu.

Bankers took €2.3 billion out of the country between September 2008 and March 2009, before signing a "gentlemen's agreement" with the IMF in Vienna in March.

The Romanian authorities fear massive exits of financing, which could pose serious problems for the economy, after a dramatic decline in lending.

"If foreign banks, through their Romanian subsidiaries, do not realize that they have obtained extremely important profits in Romania in very good times, and now, when times are difficult, they throw the burden of the crisis on the shoulders of Romanians alone and withdraw their money, then we have the possibility to apply measures such as the «Robin Hood» tax, of overtaxing profits," said Boc on the public radio station, according to the NewsIn agency.

Business Standard

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