Romania confirms VAT rate cut to 20% 2016

August 21, 2015, The Romanian Parliament confirmed on 20 August 2015 that the standard VAT rate would be cut from 24% to 20% on 1 January 2016. The rate would be reduced again to 19% in January 2017.

The Prime Minister, Victor Ponta, proposed a plan to cut to 19% in 2016 but this was opposed by the International Monetary Fund and EU which oversaw the country’s bailout during the financial crisis. This led to a watering down to a two stage cut.

The cut in Romanian Value Added Tax will increase the Romanian deficit to 2% in 2016 compared to the forecast 2015 figure of 1.8% – although this may prove optimistic. The is also risks adding to high growth in consumption and retail, and a rise in inflation. Romania had previously promised to creditors a GDP to deficit ratio of 1.2%.

Romania raised its VAT rate from 19% to 24% in 2010 at the height of the global financial crisis.

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