Romania's PM says the 5% VAT for basic foodstuff will be appealed if approved

Prime Minister Calin Popescu Tariceanu said the Ministry of Economy and Finance (MEF) will appeal the decision of cutting to 5 percent the VAT for basic foodstuff, if the measure will be approved.

The official said Romania's Constitutional Court will be called to decide upon this measure. Tariceanu believes the cutting of the VAT from 19 percent to 5 percent would reduce budgetary revenues, increase the revenues of traders and the corruption in the public administration.

Tariceanu explained the measure would result in smaller prices only for a short period after which these would increase again. The PM emphasized the state cannot force traders to lower prices just because the VAT is smaller.

In his turn Finance Minister Varujan Vosganian assured a lower VAT for the basic foodstuff will not result in smaller prices. The official said Romania will apply such a measure starting with 2010, as the country must lower inflation under EU's 3 percent.

Officials with the employers in the food industry said a cut of the VAT would result in 5 to 14 percent smaller prices. The VAT for basic foodstuff could lower from 19 percent to 5 percent after the Senate today approved a proposal made by the Social Democrat Party (PSD), Romania's largest opposition group.

PSD also proposed for the pensions under 1,500 lei (412 euros) to be tax exempted and the increase of the excise taxes for luxury goods and tobacco. The proposal was not backed by the government.

The PSD members who sustain the measure argue the VAT for basic foodstuff in several European Union countries rises to maximum 5 percent. Both the Greater Romania Party (PRM) and the Conservative Party sustained the VAT cut.

The Senate approved PSD's idea after 45 votes were cast in favor and 16 against. The proposal will be debated by the Chamber of Deputies, which will make the final decision.

NewsIn