IMF doesn’t support the government’s proposed VAT cuts

Newsroom 09/05/2012 | 10:27

Cutting the VAT for some sectors or products will not be beneficial to consumers as it often leads to tax evasion, said Jeffrey Franks, head of the International Monetary Fund (IMF)  mission to Romania this Tuesday, adding that the IMF does not support, in principle, the introduction of differential VAT rates.

“As a general principle, the IMF doesn’t recommend special VAT levels. Such a measure leads to tax evasion and doesn’t help the sectors. We don’t recommend VAT cuts for certain sectors or products,” said Franks according to Mediafax.

Agricultural minister Daniel Constantin proposed last week a reduction of the VAT for bakery products. He explained that cutting VAT on bakery products from the present 24 percent to 9 percent would draw “hundreds of millions” to the state budget from the black market.

Reducing the VAT for staples is measure that also benefits from the support of Prime Minister Victor Ponta. He said last week that cutting the VAT is a necessary measure that would be included in the state draft budget “at the latest” for 2013. He explained that a lower VAT would reduce tax evasion, support local producers, and on the medium term also increase the revenues to the state budge

Simona Bazavan

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