The Prime Minister Victor Ponta said today (October 25 ) that one of the big hits the Romanian economy took was 5 percent VAT increase, while decreases sustainable by the budget should be made so that in 2016 it will get "back to 20 percent”.

He also said that the VAT increase affects equally the rich, as well as the people with middle and small incomes, who represent 90 percent of the Romanian population.

According to a report released Tuesday by the IMF, Romania should increase the contributors’ base and the rates, and in the absence of substantial reforms even to operate flat or tax increases to ensure the sustainability of public health in the coming decades.

The VAT increase by one percentage point would further budget of RON 2 billion annually (around EUR 437 million ). IMF experts noted, however, that the VAT in Romania is close to the maximum in the EU.

In late June 2010, the Government decided to increase VAT from 19 percent to 24 percent, the increase being applied from July of the same year.  Last year, VAT receipts accounted for 23.3 percent of revenues.

In the EU, only Hungary, Sweden and Denmark have VAT rates above the level in Romania.

Ioana Toader, ioana.toader@romania-insider.com 

(photo source: Sxc.hu)