Romanian PM dismisses tax chiefs over EU funds fraud inquiry

BUCHAREST (Reuters) - Romania's prime minister sacked the head of the tax authority and his deputy on Thursday, a day after anti-corruption prosecutors said they were being investigated as part of a wider probe into alleged misappropriation of European funds. The government press office confirmed Gelu Diaconu and his deputy Mihai Gogancea-Vatasoiu had been dismissed after Prime Minister Dacian Ciolos said he was waiting for Finance Minister Anca Dragu to propose replacement tax chiefs. "For me, what is most important is that the tax authority remains a credible institution," Ciolos told reporters. Diaconu and Gogancea-Vatasoiu had been asked to resign by Dragu on Wednesday, but declined to so. In a statement published on the tax authority's website, Diaconu denied any wrongdoing and described the case as "Kafka-esque". "One prosecutor's actions are destabilizing an institution that is vital to the Romanian state," he added. Gogancea-Vatasoiu could not be contacted for comment on Thursday. Prosecutors said on Wednesday that two Romanian lawmakers and eight other persons had allegedly defrauded two projects worth a total 27.25 million lei ($6.91 million) aimed at supporting the underprivileged Roma minority. They allege that Diaconu and Gogancea-Vatasoiu signed papers that exempted those involved in the projects from tax. Romania's anti-graft prosecutors have been praised by Brussels for their efforts and last year had a conviction rate of over 90 percent. The tax authority has been through an overhaul aimed at helping it combat widespread tax evasion, and collection improved in 2015. Romania is seen as one of the European Union's most corrupt states and its justice system is closely monitored by Brussels, which has suspended payment of development funds several times due to irregularities. Its reputation for graft has deterred foreign investment while tax evasion and bribery are a drain on public finances. Anti-corruption prosecutors have cracked down hard on high-level abuses in recent years, investigating lawmakers, cabinet ministers, mayors and even former prime minister Victor Ponta. (Reporting by Luiza Ilie and Radu Marinas; Editing by Catherine Evans)