Former Romanian prime minister Ciuca speaks of VAT rate hike

The option of hiking the VAT rate for some goods (currently at preferential levels) will be assessed by the experts, said former prime minister Nicolae Ciuca, the leader of the National Liberal Party (PNL), which supervises the Ministry of Finance.

The option does not refer yet to hiking the general VAT rate and is among those considered by the Liberal Party for keeping the public deficit under control. Among the side effects is higher inflation – but this would also help the government achieve a lower budget deficit and deficit-to-GDP ratio.

The categories envisaged are those of food sold in restaurants and through catering services (from 9% to 19%), books (from 5% to 19%), hospitality services (from 5% to 19%) and organic food products (from 5% to 19%).

"As regards the VAT hike, we must be very careful about the effects it produces because, as a rule, VAT, on the one hand, increases inflation, on the other hand, it has been shown that it does not always bring economic growth. That is why we are waiting for experts to make a decision, to evaluate the economic effects and, of course, the effects on the population," PNL leader and former PM Ciuca said, quoted by Mediafax, when asked whether an increase in VAT or VAT hikes for certain categories of products could be an option to reduce the budget deficit.

(Photo source: Inquam Photos/Sabin Cirstoveanu)