RSS
Ruling coalition to abandon zero VAT for housing and advertising; IMF: "it will put considerable pressure on the budget deficit”
Noting a substantial drop in the tax burden in Romania, the International Monetary Fund has called on lawmakers to avoid further tax cuts, tax-news.com reads.
The IMF said that successive tax burden-cutting measures, impacting value-added tax (VAT), fuel excises, and health contributions had resulted in a drop in revenue worth nearly 2.5 percent of GDP over 2016 and 2017.
It added that plans by the Romanian Government to further reduce taxes in 2017 and 2018, including further cuts to VAT, an expansion of VAT exemptions, and reform of personal income tax rates, "will put considerable pressure on the budget deficit."
The IMF also said that the country should focus on improving tax administration by improving transparency and redoubling efforts to tackle tax evasion. It noted that the country has the largest VAT compliance gap in the EU.
Recently, Liviu Dragnea, the head of the Social Democratic Party (PSD), has announced that the government will drop any initiative to eliminate the VAT for the acquisitions of houses and for advertising in the case of the media industry, business-review.eu reports.
Dragnea said this initiative was dropped although it was mentioned in PSD’s campaign manifesto for the general elections.
The PSD head said that representatives in the advertising and media said that “this measure might have perverse effects.” The same reaction came from the side of construction firms, claimed Dragnea.
“Since the beneficiaries didn’t agree we will have to stick to zero VAT on agricultural inputs,” said Dragnea.