Romania to Decrease VAT in 2016
- Aug 26, 2015 | Gail Cole
Value added tax (VAT) in Romania is currently 24% for most goods. Effective January 1, 2016, the general rate will drop to 20% and the rate for books will drop from 9% to 5%. On January 1, 2017, VAT will be further reduced to 19%.
Higher VAT rates were introduced in Romania 2010, when the global economy was in crisis and strict austerity measures were deemed necessary. Now the government is seeking to “boost consumption and bring purchasing power closer to levels seen in richer western EU states” (Bloomberg Business). Lower VAT rates on all items, particularly food and books, are an integral part of that plan (the VAT rate for food was lowered from 14% to 9% on June 1, 2015). The government has also raised the minimum wage and doubled state subsidies for children (Reuters).
Romanian MPs initially planned to institute the 19% general VAT rate as early as January 2016; however, members of the International Monetary Fund and the European Commission voiced concerns over such a dramatic reduction in the VAT. This summer, they “cautioned that such fiscal easing threatened to undermine the country’s fiscal consolidation efforts and pointed out that Romania had not examined the sustainability of the plan thoroughly enough” (Focus Economics). Staggering the VAT decrease is one way MPs are addressing such concerns.
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