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Bucharest
February 25, 2021
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Lower bread VAT gives Government satisfaction

By   Constantin Radut

Prime Minister Victor Ponta insisted to accompany his two subordinates – FinMin Ioana Petrescu and Agriculture Minister Daniel Constantin – during a press conference at the Ministry of Agriculture, presenting the report after a year since the value-added tax in the milling and banking industry had been cut from 24 to 9 per cent. The PM appreciated the initiative and ‘courage’ of Agriculture Minister Daniel Constantin, as well as of the baking industry employers’ organisation led by Aurel Popescu, especially since results seem to be pretty good. The most notable effects of the reduction of the VAT in the industry are a decrease of the tax evasion by approximately RON 300 M and increase of purchasing power by RON 600 M (approximately EUR 136 M).

The VAT reduction for milling and bakery products from 24% to 9% on September 1, 2013 has led to a 20% reduction in tax evasion and has generated for consumers savings of 136 million euros, according to the impact assessment study of this measure, conducted by the authorities and relevant employers.
Consumers have purchased for one year cheaper products by 12%, which has led to an increase in purchasing power of the population, having generated savings of 200 million lei for the purchase of flour and 400 million lei for the purchase of bread.
Also, the production of taxed milling and bakery foodstuffs increased by 280,000 tonnes compared to the same period in previous years, and insolvency and bankruptcy processes in the sector were stopped.
After the VAT reducing, in the period September 1, 2013 to August 30, 2014, flour production went up by 19% to 726,000 tonnes, from the period September 1, 2012 to August 30, 2013, when it stood at 606,000 tonnes.
In the said period, bread production advanced by 20%, from 862,000 tonnes to 1.026 million tonnes.
Asked if the results obtained in the sector after the reduction of BAT would become the basis for similar action in other fields, both the prime minister and the minister of agriculture said that the authorities were currently engaged in analyses and impact studies to asses the opportunity of rolling out the VAT cut to vegetables, meat and meat-derived products.
A decision on that will be made after consultations with the IMF and European Commission.

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