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June 26, 2022

PM Ponta: Gov’t to decide on VAT cut by 4 per cent these days

Prime Minister Victor Ponta said Monday that the Government will these days decide on the cuts in the Value-Added Tax (VAT).

‘We will complete all analyses today and I will have a conversation with the governor of the National Bank as well. Last week I informed Romania’s President about the first quarter data in our possession. The new Finance Minister Mr. Teodorovici has already talked with our partners from the International Monetary Fund and the European Commission, and we will make a decision today or tomorrow,’ Ponta said at the Socialist Democratic Party (PSD) main offices in reply to a question about the VAT cuts.

He mentioned the Government revenue collection is exceeding expectations by far.

‘Our collection is exceeding expectations by far; there is nearly RON 3-3.5 [million] in excess of what had been projected, so spending is smaller. This allows us to go further with the idea of tax unburdening related to the VAT, even before the coming into force of the Tax Code on January 1. This is 107 per cent over the projections. The rise in March alone was of 114 per cent. So the fight against tax evasion had effects,’ added Ponta quoted by Agerpres.

He said tax administration is much simpler for a standard tax than for differentiated brackets.

‘If not the entire chain is involved, you generate some major malfunctions. Likewise, differentiating between products, that is from the most expensive to the least expensive, is almost impossible to do. There is no saying what luxury meat is and what ordinary meat is. So, from the point of view of tax administration, cutting the standard [VAT] from 24 per cent to 20 per cent is much easier to manage than some differentiated brackets. (…) Specialists are voicing their opinions. Currently, particularly when it went from 19 to 24 per cent effectively, collection was up 1.5 per cent. So, the tax went up 5 per cent legally, but collection was up only 1.5 per cent. By our reckonings and analyses, if we cut by 4 per cent, collection proper will not change, but that difference between what the law would say and what would really be collected will get smaller, because we have a strong National Tax Administration Agency (ANAF) and the stimulus of cutting the VAT and so tax evasion will surely decrease, which has already happened,’ said Ponta.

In the same context, he said once again that there is excellent cooperation between him and President Klaus Iohannis.

‘I love the Constitution as much as Mr .President does and there is excellent institutional cooperation between us. Economic policy is the Government’s province; I no longer want to relive the moments of 2012, when the then President was announcing from the Presidential Palace pension and wage cuts and VAT rises, things that the Government certainly had to decide, because economic policy is the constitutional prerogative of the Government. The Government has put up for public debate a Tax Code; it discussed with all the interested parties, we saw a draft, which is currently with Parliament: it will be debated over in the Senate and the Chamber of Deputies, after which it will go to the President for promulgation. This is a constitutional procedure that I believe is very good and that we all respect,’ said Ponta.


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