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Romania Fin Min: Hiking VAT, Flat Tax A Mistake

Romania would make a “big mistake” to increase the value added tax and the flat tax, as changing them after the effort it took to keep them at the current levels would be procyclic policy, an official of the Finance Ministry said Thursday.
Romania Fin Min: Hiking VAT, Flat Tax A Mistake
19 nov. 2009, 12:25, English

„The crisis might be an opportunity to reform the state and its finances (…). We must learn from past mistakes to avoid procyclic policies. Hiking the taxes would be a big mistake, because it would be procyclic policy and we mustn’t repeat the mistakes we made in the past,” said Gratiela Iordache, secretary of state with the ministry.

Iordache also said Romania should reduce public expenditure, particularly with pensions and wages, as the costs, calculated as volume in the gross domestic products, are almost double the European Union median.

Despite the ongoing political turmoil, Romania has guarantees for economic growth in the future, as well as potential in sectors such as agriculture, tourism, environment protection and renewable energy.

However, one of the biggest challenge for the Romanian authorities was to keep unemployment in check, Iordache said.

„The jobless rate could increase further by the year-end. Romania wanted and managed to have one of the lowest unemployment levels in the EU,” Iordache added.

Romania’s jobless rate rose for the 15th consecutive month in October to 7.1%, from 6.9% in September, but remained below the EU’s average of 9.2%.