VAT Reduction for Foodstuffs

The reduction of the VAT for foodstuffs proposed by the Romanian government was approved by senators.

România Internațional, 13.05.2015, 14:00

An important part of an ambitious government program of fiscal
relaxation, the reduction of the VAT for foodstuffs as of June 1st
was green-lighted by the Romanian senators. The measure is aimed at reducing
the VAT from 24% to 9% for all foodstuffs, non-alcoholic drinks, and restaurant
and catering services. Seen by the executive as a way to encourage consumption
and implicitly to consolidate the growth trend reported by the Romanian
economy, the measure was regarded with skepticism in terms of the significant
drop in shelf prices it was supposed to produce.

The skepticism was fueled by
the suspicion that hypermarkets augmented the prices in advance, to maximize
their gains. According to the PM, it is the market that will regulate the
situation, and a smaller VAT will be reflected by the products’ prices. The
calculations presented by the Agriculture Ministry point to a drop in prices
for foodstuffs of about 12%. The authorities’ optimism is shared by a large
part of the population. Most Romanians believe that the reduction of the VAT
for foodstuffs and non-alcoholic drinks is a good measure both for them and for
the economy, shows an opinion survey made by Inscop Research upon order by the
Adevarul daily. 34.5% of the respondents claim that smaller fees and taxes, as
stipulated in the new Fiscal Code, mean less money for healthcare, education
and infrastructure. However 39% of the respondents believe the opposite. Around
27% do not have a clear opinion about the issue or refused to answer, which is
indicative, according to the surveyors, of the lack of information or
understanding of the economic and budgetary mechanism.

According to the same
survey 37.7% of the Romanians estimate that prices will be smaller, although,
in their opinion, the drop in prices will not fully observe the VAT reduction.
Around 33% of the respondents believe that prices of foodstuffs and
non-alcoholic drinks will not decrease, while 19% believe the contrary. All in
all, 57% of Romanians think the reduction of the VAT will be reflected in
smaller shelf prices. The government’s decision to cut the VAT from 24% to 9%
for foodstuffs and non-alcoholic drinks is preferred by 62% of the population,
to the detriment of the idea of a general reduction of the VAT from 24% to 20%,
which is favored by only 29% of the respondents. The survey was conducted
between April 23rd – 30th on a number of 1,085 people
with a plus/minus 3% maximum error.