Romania plans VAT drop on bread in pilot project

The Romanian Government plans to reduce the VAT on bread and pastry products sometime in 2013, with hopes the move will tackle tax evasion in this area. The new VAT for bread could be 9 percent – down from 24 percent, the general VAT level in Romania, according to Agriculture Minister Daniel Constantin. Tax evasion in this field is of some 70 percent and reducing the VAT would increase the taxable base, which would compensate for the amounts that never make it to the state budget. If the pilot project works – meaning if the tax evasion drops from 70 to 20 percent - the same measure could be applied to other products as well. The minister explained that this is not a social measure meant to reduce the price of bread, but rather help fight tax evasion. The new measure will not be included among the talks with the International Monetary Fund (IMF) team in the current review mission, but rather in March – April, when a new loan agreement will most likely be discussed. PM Victor Ponta previously said that he intends to apply the pilot project of reducing the VAT for basic food in 2013, with a first project being bread, but excluding some pastry products, such as the cake called cozonac. editor@romania-insider.com (photo source: Photoxpress.com)