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Is the state greedy? Romania's paradox: we have the lowest price in the EU for natural gas production, but one of the highest taxation regimes

imagineRomania has the lowest purchase price of natural gas production in the EU. In turn, before the new taxes announced at the end of last week by PSD, Romania had the fourth highest tax regime in the EU! The figures provided by Eurostat show that the rhetoric of the Dragnea - Vâlcov - Teodorovici trio, which has advocated for capping the price of natural gas, is nothing but cheap populism.

In our country, the first piece of vaudeville with an unfortunate end was invented the other day. It is named the "greed tax". Action takes place around Romania's natural resources and, from comedy, everything is transformed by PSD and ALDE into tragedy. Why? Because in our country natural gas is used rather for propagandistic and ideological purposes than for concrete things, such as restarting the industry or connecting homes where people are warming up using brushwood. And if you are a politician and stick on the Greed Tax the stamps "Romanian" and "Romanian", you have the feeling you can qualify as a great patriot, worthy of history books. Capping gas prices to RON 68/MWh until 2021 was intended to be a measure that sanctions, in theory, an abusive behavior of producers which, enjoying a price acceleration at the expense of consumers, have recorded huge profits. But was it a correct decision? How is, in fact, the major beneficiary of capping gas prices? Is it truly a measure that protects consumers? Who is in fact greedier? The state or producers?

Romania had the lowest acquisition price of gas production in the EU

Figures show something else. In a ranking based on the data provided by Eurostat, Romania was by far the country which, before taxation, had the lowest acquisition price for production in the European Union. In Romania, the price average recorded in 2018, before capping, was EUR 18.6/MWh, while for example at our neighbors subscribed to Russian gas the level was higher. In Hungary it was EUR 28.2/MWh, and in Bulgaria - EUR 31.6/MWh. 

imagineSource: Eurostat, data updated on 21 December 2018

But things don't change even when we analyze the acquisition price of gas production including the taxes reaching the budget. Romania collects to the state budget amounts of money from gas producers from royalties calculated depending on the reference price on the Day Ahead Market of the Austrian exchange, VAT, excise duty and the windfall tax.


imagineSource: Eurostat, data updated on 21 December 2018

Specifically, the Romanian state collects on average EUR 13.5/MWh, but apparently at a total average price of EUR 32.1/MWh we remain the country with the cheapest gas in the EU. And this although we have the fourth largest proven gas reserve in the Union and we are also the main gas producer in the eastern part of the Union.

The level of taxation of natural gas production is among the highest in the EU

The reality shows that, before limiting the selling price of natural gas production, the Romanian state took full advantage of the fact that Romania recorded the lowest level in the EU. In the price structure, 43% is represented by taxes reaching the budget!

imagineSource: Eurostat, data updated on 21 December 2018

Only Denmark, the Netherlands and Sweden have a slightly higher taxation regime, but they provide an entire infrastructure favorable to investment. Unlike Romania, these four countries mentioned, which are natural gas producers, earn even more money on the budget as they apply a higher rate of taxation at a higher production price than the one recorded in Romania. Instead, in our case, this way of taxing natural gas and the fact that for years the selling price of production has been established administratively, by government officials, discouraged investment in new exploration operations, in new technologies, to substantially increase the degree of recovery of the fields, and also the investments in the search for new options for the diversification of the activity. Both OMV Petrom and Romgaz considered investing in the petrochemical industry. Probably with the new taxation regime the stake will be survival.

Capping the price of gas production does not help the population or the industry

For each MWh sold from domestic production, the Romanian state thus collects EUR 13.5. No money was used from this amount in 2018 for measures to protect poor consumers or to provide incentives to small suppliers to extend the gas network in the forgotten areas of this country. Thus, in Romania an old woman with a pension of RON 700 pays the same price per Kwh of gas as the three persons who have victoriously announced that they have taken down multinational companies. Capping gas prices will not take Romanians out of poverty. On the contrary, the impact on the final bill will probably be insignificant. It remains to be seen how ANRE regulates the supply price in 2019.

The decision to freeze production price at the value of RON 68/MWh will not help even the large industrial consumers. This price is slightly below the average of 2017 at which domestic gas production was traded on the Romanian Commodities Exchange. Nobody remembers for example the petrochemical industry blooming last year, a sector which, despite the potential of our country, hangs like a boulder on trade deficit.

In turn, capping gas prices will be ticking bomb for any other government that could replace the PSD-ALDE coalition in 2020. Why? The capping measure also affects contracts in progress and the text of the GEO shows that the price difference will be paid as compensation in 2022. Apparently, the only winner from this entire operation is the state. With the application of the 2% tax on turnover, more money will be collected to the budget from gas producers, but this money will be used for special pensions, electoral favors and other measures that do not bring welfare and do not protect vulnerable consumers.

 

Source: adevarul.ro

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