Romanian VAT to remain at 19 percent

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Monday, February 28, 2005

[[w:Bucharest, Romania|Bucharest, Romania]] — The Romanian Finance Minister Ionuţ Popescu has responded to public fears of a rise in value added tax (VAT) by saying that Romania's VAT will remain at 19% and will not increase. He rejected rumours that the value added tax, which is applied to most goods and services, will increase due to negotiations with the International Monetary Fund and a need to boost government revenue.

After introducing a low flat tax rate of 16% on January 1, 2005, which applies to both personal income and corporate profits, the government has had to fund the tax cuts through alternative means, including increases in other types of taxation, to avoid running a high budget deficit. For example, from April 1, the government will increase excises as well as a range of other taxes. Despite the increase, Romania continues to have one of the lowest fiscal burdens in Europe due to the new 16% flat tax rate.

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