BUSINESS

PM advisor Socol: Food VAT cut contributes to economic growth potential from 3 to 4 pct in 2015

The food VAT cut will contribute to an increase of the purchase power and of the economic growth’s potential, from 3 percent to 4 percent in 2015, by boosting consumption and investments, the Prime minister’s advisor on macro-economic matters, Cristian Socol says.

“Beneficiaries will be firstly the people with low incomes and the middle-class whose daily consumption basket’ weights of the food and non-alcoholic drinks are up to 90 percent, as of 27 percent. The main beneficiaries will be those from the poorest households – several children families, single parent families, pensioners, unemployed, farmers, families with employees paid under the average wage (83 percent of the Romanian employees) and the average incomes’ households. Welfare pluses will be for each and every Romanian,”, Cristian Socol told Agerpres on Monday.

According to him, the food VAT cut to 9 percent (from 24 percent) that has entered into force on June 1, would contribute by a 4 percent raise in the purchase power of the people with high incomes and a 15 percent for those with low incomes.

Likewise, Cristian Socol believes that the food VAT cut to 9 percent will contribute to an increase of the economic growth’s potential by giving a boost to consumption and investments.

“The food VAT cut could be easily supported by the state budget, given that the January-April data regarding the budget execution show consistent additional collection of money of plus 7.05 billion lei. So, the measure would not harm Romania’s commitments to the IMF, EC and WB creditors, nor the long-term stability of the public finances agreed through the Fiscal Pact (the average term structural deficit objective). From January 1 2016, the macro-economic outlook will continue with the general VAT cut to 20 percent, with the continuation of the implementation of the fiscal stimuli in order to increase consumption and thus to balance the domestic demand – foreign demand engines in the structure of a 5 percent sustainable economic growth starting with 2016,” Socol added.

 

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