Regulars
POLTICS
Money laundering is legal, after all;
it's just that it's going to be taxed
at 90 per cent

by Andrei Postelnicu
May 2004

As I write these lines, the Romanian government is mulling the idea of taxing ill-obtained fortunes at 90 per cent. With so much of the money floating about Romania having come from uncertain sources through uncertain means, and with tax collection so low, it would seem quite sensible to tax ill-gotten gains at 90 per cent.

In theory, a lot of money would go to a cash-starved budget to be put to better use. In practice, this is money-laundering, institutionalised at the highest level. Furthermore, it is an admission of the government's own incompetence in both prosecuting white-collar crime and collecting taxes.

What the Romanian government is proposing boils down to legitimising white-collar crime and transforming mafia-style businesspeople into honourable taxpayers.

Given the government's almost non-existent moral capital, such a legislative initiative defies common sense and the most elementary principles of governance. And that's not all.

Let's forget principles for a moment and be pragmatic. Let's just say it's more important to collect revenues than quibble about morals.

Even if we accept that vantage point, the practicalities of the matter cloud the issue. I might be alone in this, but I have little faith in this government to devise an effective way to distinguish between what is illicit and what is not.

Who gets to decide what is a legitimate fortune and what is not? According to what rules? And who might get to draw up those guidelines?

The current executive ñ not to mention Parliament ñ has too many of its members associated with shadowy goings-on and murky business dealings. From the fact that Nicolae Vacaroiu, the senate president, used to run one of Sorin Vantu's banks, to transport minister Miron Mitrea's links to television chains and sprawling business empires with cosy ñ and lucrative ñ dealings with government agencies, there is too much potential that whatever rules designating the legitimacy of gains will be arbitrary. When wealthy government officials get to decide whose wealth is legitimate and whose is not, in the context of their own disregard for good governance and a promiscuous relationship with the truth, nothing good can come out.

For one thing, there is the danger that vendettas will be carried out with rivals' money being declared illegal and subject to a 90 per cent tax. Not that my heart is bleeding for certain types having money taxed that way, but this is a dangerous precedent to be setting. When the methodology for subjecting a certain type of income to such a tax is murky, everything that follows becomes uncertain. Investors who were reluctant to come to Romania until now will not get encouraged by a law that might see their return taxed at 90 per cent just because they chose a Romanian partner who might be targeted by a ënaming and shaming' campaign run from Victoria Palace.

If the moral implications of this initiative being so unsavoury and the technicalities of it raise further ñ and equally uncomfortable ñ questions, the thinking it reflects is also a cause for serious concern, even if it is not new.

This proposal ñ which, by the way, smacks of populist undertones in an election year as it can feed into the impoverished populace's desire for punishing the wealthy ñ is yet another incarnation of the Nastase government's attempt at saving face at the last minute, having failed to implement fundamental reform to begin with.

Instead of concentrating on creating a legal framework that discourages wrongdoing and helps legitimate businesses, the PSD administration wants to merely recoup its losses from the illegal activities it merily played along with, even if only by doing nothing.

This is reminiscent of the Prime Minister's threat to dismiss chiefs of police if they failed to produce those guilty of attacking journalists. That came instead of credible efforts to encourage free speech and accept critical debate, to curb the ëlocal barons' that were clobbering journalists. Not to mention that the PM presided over the revision of a criminal code that did not exclude libel.

And to add further irony to it all, it so happens that this proposal to tax ill-gotten fortunes by 90 per cent comes as the government has retained Porter-Novelli, a high-powered US public relations firm, to better present its case in Brussels. I wonder what those account executives say when they hear they have to dress up such decisions. Do they even realise how hard they'll have to work to earn their fee? Because it is one thing to do PR for a client whose generally good actions go unnoticed. It is an entirely different thing to do PR for a client who behaves like a thug and wants to be known as a gentleman the country club should let in through the front door.

Andrei Postelnicu is a New York-based journalist with the Financial Times, and writes for Vivid in a personal capacity.