Romanian Fin Min Says Lower VAT On Food Won’t Lower Prices But Endanger State Spending

Romanian Finance Minister Gheorghe Ialomitianu said Friday he will try to convince lawmakers not to adopt a bill that lowers the sales tax on basic food items because the measure will not lower food prices and will jeopardize the country’s budget spending.

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Ialomitianu said the move would endanger the Government's spending on wages, pensions and investments.

"Romania cannot afford a lower VAT at the moment. From previous experience, food prices have not decreased and tax evasion widened, as many products were counterfeited," said the minister.

In October 2010, the Parliament adopted a bill cutting to 5% from 24% the value added tax level for bread, meat, milk, edible oil and sugar, in a move termed as "erroneous" by representatives of the ruling Democrat Liberal Party.

According to the democrat liberals, the MPs thought they were voting a committee report to reject the tax cut.

President Traian Basescu has subsequently sent the bill back to Parliament, but the Senate on Wednesday rejected his reexamination request. The bill is pending a final vote in the lower house, which is the decisional chamber in the matter.

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