EFET urges Romania to scrap tax hike for electricity sector

The European Federation of Energy Traders (EFET) has called on the Romanian government to urgently suspend the enforcement of the turnover tax for the electricity sector because it would lead to an unprecedented increase in turnover fees by 2,000%.

According to Romanian media, the government decision which came into effect on December 29, 2018 introduces 2% turnover tax for companies operating in the electricity and gas sector.

The EFET believes that the Emergency Government Ordinance no. 114/2018 needs to be suspended because it will bring adverse consequences for the electricity market functioning in Romania, the Romanian consumers, as well as the country’s social welfare, the EFET said in a press release.

According to the EFET, the decision adopts a principle whereby the fee to be paid in 2020 by the businesses affected is calculated retroactively on revenues from 2019, which, in turn, are mainly based on the transactions concluded in 2018.

The effects of the measures set out in the government decision, unless urgently suspended, will be devastating, the EFET said, adding that the decision is implemented without any prior stakeholder consultation or impact assessment.

These measures will also constitute a serious barrier to market entry, jeopardizing liquidity and competition, leading to an increase in both wholesale and end-consumer electricity prices, and ultimately, reducing the overall social welfare in the country, the European Federation of Energy Traders said.

Romania’s Association of Electricity Producers (AFEER) has also urged the government to scrap the new decision. It warned that this could lead to a 5% hike in end-consumers bills.

The Emergency Government Ordinance no. 114/2018 will have a major impact on companies doing business in the energy, telecom, and banking sectors, which caused complaints by domestic and foreign investors, Romanian media reported. The decision introduces new taxes for banks, as well as the provider of energy and telecom services.

The Romanian government said that this decision will improve citizens’ welfare.