“We have communicated to the Prime Minister a number of concerns about the Government’s plans for the new Tax Code which will substantially reduce the VAT rates, which, according to the European Commission estimates, would have a substantial negative fiscal effect,” Dombrovskis said Wednesday during a joint press conference with Ponta and Labor Minister Rovana Plumb.
Dombrovskis said talks with the Romanian government will continue, including with experts, adding he will discuss with Finance Minister Eugen Tedorovici about the fiscal effects and potential compensatory measures in order to find the best solution to ensure Romania’s financial sustainability.
The EC Vice-President pointed out that 2015 is the first year in which the Commission conducted an in-depth analysis regarding Romania’s economy and noticed that Romania is facing certain macro-economic imbalances. He also said the Romanian Government needs to find a way to strengthen competitiveness in order to solve the negative situation of investments and enhance its export capacity on the medium term.
Dombrovskis went on saying that Romania must continue structural reforms to improve the efficiency of using EU structural and cohesion funds, in a move to obtain better results regarding the social system, to sight inequality and poverty and cope with certain deficiencies in the governing process and public administration.
According to Dombrovskis, the European forums expect Romania’s economic growth rate to reach 2.7% in 2015 and 2.9% in 2016.
Prime Minister Victor Ponta on Tuesday said Romania will cut the value added tax rate for all food products, including non-alcoholic drinks and restaurant services, as of June. The rate will be reduced to 9% from 24% currently.
The government also plans to cut the standard sales tax to 20% as of January 2016, after first-quarter revenue collection exceeds expectations.