VAT of 9 pc on foodstuffs goes into force as of June 1. Prices should drop by 12 pc

June starts with products discounts given the value added tax (VAT) cutting. Thus, as of Monday, VAT is reduced from 24 percent to 9 percent for foodstuffs, non-alcoholic beverages, domestic live animals, birds, seeds, plants and ingredients for food processing and products prices should fall by 12 percent.

For example, if for a piece of cheese of 250 grams, the price of RON 10, no VAT, the customers were paying RON 12.4 with VAT of 24 percent, from Monday they will pay RON 10.9, saving RON 1.5.

Reduced rate of VAT will apply throughout the economic chain, from production to sale to the final consumer, by all suppliers, whether they are manufacturers or retailers, according to the application norms of the tax measure.

The buyers should find the new prices signaled on the shelves, and they can read on the tax receipts, under total payment, how much totaled both VAT of 9 percent and VAT of 24 percent (for products with standard rate).

Several retailers have announced that they will fully reflect the VAT cutting in the cost of products after the Association of Big Commercial Networks in Romania (AMRCR) has recommended to its members to use all available tools so that lowering VAT to be reflected in the price on the shelf, while the traders was accused of artificially raising the prices.

The government estimates that, by cutting the VAT to 9 percent for food products, soft drinks, restaurants and catering sector, the impact on the budget of RON 18.25 billion (approx. EUR 4 billion) accumulated until 2018, and should be covered by the additional revenues earned by ANAF and by the multiplication effect.

Thus, for the second half of this year, since the VAT begins to be applied, the impact on the budget will be nearly RON 2.44 billion; will reach RON 5.17 billion next year, about RON 4.78 billion in 2017 and RON 5.86 billion in 2018.

Instead, Valdis Dombrovskis, Vice-President of the European Commission, said during his official visit in Bucharest in April that there are concerns in Brussels related to the Romanian Government’s plans in regard to the new Tax Code, saying the VAT cut will have a substantial negative fiscal effect.

However, most Romanians consider that the reduction in VAT for foodstuffs and non-alcoholic beverages represents a good measure both for them as well as for the economy, reveals an opinion barometer conducted by Inscop Research and commissioned by “Adevarul” daily.