Romania's PM Victor Ponta has announced that the reverse tax on agriculture will be extended and that the European Commission and the EcoFin Council have OK-ed the move, after previously turning down the proposal.
“I want to announce that after sustained activity by our representatives before the European Commission and the Ecofin Council, the good news is that we can continue the reverse tax in agriculture,” said PM Ponta (in picture) today (June 3). The reverse tax shifts the VAT burden down the supply chain from producers to recipients. Envisaged as a temporary exemption, the EC would like to see overall tax reforms and better supervision to reduce tax evasion. The time limit on the reverse tax, applicable to cereals and other selected crops, is now May 31, 2014, according to local news agency Medifax. The previous deadline for the expiration of the tax was June 1, 2013.
The reverse tax on VAT was implemented two years ago to improve collection rates and reduce evasion by creating phantom companies to avoid paying VAT. The measure is not in-line with current EC regulations on taxation, but a proposal to introduce a rapid response mechanism for VAT evasion has been forwarded, under which Romania and other Member States could use systems like the reverse tax as a short term solution, without flouting EU legislation.