Romania to Approve Easing of Controversial ‘Greed Tax’ Next Week

(Bloomberg) -- Romania is set to soften a controversial ‘greed tax’ on banks next week, shortly before the first payment would kick in, according to the country’s finance minister.

The levy on banking assets, which took force in January, will be cut to 0.4 percent a year for the biggest lenders from an initial 1.2 percent, Eugen Teodorovici said Wednesday in an interview. The charge will also be applied to only 20 percent of banks’ financial assets, rather than 100 percent as initially envisaged, he said.

“Our goal remains the same: to encourage banks to lower financing costs for citizens and boost funding for big projects,” Teodorovici said in Bucharest.

Romania has been under pressure to dial back an ad hoc package of taxes that are aimed at narrowing the budget deficit but which roiled markets, companies, investors and the central bank. Pledges to backtrack on the original version of the bank tax earned a reprieve last week from S&P Global Ratings, which had planned to cut the nation’s sovereign credit outlook.

While initial estimates indicated the levy on banking assets would raise about 5 billion lei ($1.2 billion) in extra revenue in 2019, the revised version will generate less than 1 billion lei, Teodorovici said. He reiterated that this year’s budget doesn’t include revenue from the tax.

A link between the levy and money-market interest rates will be eliminated, according to the minister. Local banks with a market share of less than 1 percent will pay a tax of 0.2 percent a year. The tax base won’t include government treasuries, minimum reserve requirements or loans for state investments.

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