Romanian PM says VAT rate will not increase next year

The prime minister and head of the senior ruling Social Democratic Party likely to preserve its dominant position after the general elections in November-December, Marcel Ciolacu, quoted by Economica.net, assured again, on October 9, that there will be no VAT rate increase next year.

The prime minister declared himself totally in favor of implementing a "budgetary reform."

However, he mentioned that fighting tax evasion related to VAT or enforcing centralized acquisition procedures are more likely strategies for the first instance to be approached. The VAT rate hike would generate inflation and put an end to the rise of private consumption eroding households' standard of living, he commented.

Ciolacu made these clarifications when asked about the VAT rate hike scenario circulated by analysts as the baseline scenario for the fiscal corrective package negotiated by the Executive with the European Commission under the Excessive Deficit Procedure.

Indeed, the VAT rate hike doesn't seem the first step to be taken by the Social Democrats if they consolidate their position in the Executive – while various alternatives of increasing the corporate taxation or various versions of progressive income taxation are more likely and in line with the party's rhetoric. Nevertheless, the European Commission or the International Monetary Fund seeking immediate results are more inclined to favor actions such as VAT rate hikes.

"The discussions between the minister of finance and the European Commission have just ended. He had meetings today as well, in an hour he will get on the plane and come back, and I am convinced that he will inform me and [junior ruling party's head] Nicolae Ciuca [about the outcome of the talks]," declared Marcel Ciolacu.

(Photo source: Inquam Photos/Malina Norocea)