February 26, 2019 / 12:52 PM / a month ago

Romania to lose $540 mln in taxes from gas price cap, industry says

BUCHAREST, Feb 26 (Reuters) - Romania will lose 2.26 billion lei ($540 million) in energy taxes a year after it capped gas prices via an emergency decree in late December, the association of Romanian oil producers (ROPEPCA) said on Tuesday.

The decree, approved by the Social Democrat government without an impact assessment or public debate, introduced a raft of new measures including a 2 percent turnover tax for energy firms as well as a three-year cap on gas and electricity prices.

The government has said the measures aimed to lower costs for households, as Romania gears up for four elections this year and next.

But a study on the impact of the measures on the gas market by consultancy firm Deloitte commissioned by ROPEPCA showed that in addition to a loss of tax revenue, the decree would also trigger a drop in production and investment.

“The measures are strongly anti-competitive, both for the domestic market and compared with foreign producers, they also put local producers at a disadvantage versus participants in the industry chain,” ROPEPCA president Saniya Melnicenco said.

“We have received countless signals that exploration and production programmes will be reduced by 30-50 percent.”

She also said capping prices for the country’s entire gas production was not the right way to protect household consumers, who account for only a third of domestic consumption.

The tax revenue loss stems from lower royalties, profit and value added tax as well as dividends, Deloitte energy expert Sorin Elisei said.

The decree has triggered criticism and asset price falls to multi-year lows.

Melnicenco said producers were hoping lawmakers would make changes to the decree in parliament. She added the bill could later be challenged at the constitutional court and that, depending on its final content, some producers were considering taking Romania to court.

$1 = 4.1883 lei Reporting by Luiza Ilie; Editing by Mark Potter

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