Romania's Budget Crisis: VAT Hike, Tax Increases on the Table

Romania's Budget Deficit: Tough Choices Ahead Romania faces a growing budget deficit, prompting the government to consider drastic measures. Three main scenarios are under consideration: increasing the Value Added Tax (VAT) from 19% to 21%, eliminating reduced VAT rates on certain goods and services, and raising income tax from 10% to 14%. "The most drastic measure would be raising the VAT," explains Ionuț Grama, owner of a local grocery store. "The consumer will ultimately feel the effects of this increase." Meanwhile, Eduard Pavel, owner of a restaurant, worries about the impact of raising the VAT on his business, stating, "The increase from 5% to 9% is quite significant." Economists are concerned about the effectiveness of these measures due to widespread tax evasion. One estimate suggests that 30% of VAT revenue isn't collected. The European Commission is pessimistic about Romania's economic recovery, predicting a deficit of 8.6% this year. Despite these challenges, there's hope. Romania has access to approximately €20 billion in European funds, which could provide a significant boost to the economy. The government will need to carefully consider these options to address the budget deficit without triggering a recession.