Romania to Cut Taxes to Boost Growth

Romania's centre-left government led by Prime Minister Victor Ponta on Wednesday unveiled plans to cut VAT from 24 to 20 per cent, and reduce taxes on meat, fish, vegetables and fruit to 9 per cent from next January onwards.

The changes are part of the new fiscal code, which is now undergoing public debate.

The flat tax on income and profit will go up from 14 from 16 per cent, meanwhile, in 2019.

The new code also scraps the tax on dividends starting from January 2016, lowers taxes on active micro-enterprises and cuts the excise duties on fuel and alcohol, among others.

Ponta said the public had a month to debate the planned fiscal changes before the draft law is sent to parliament for approval.

Ministers say the benefits of the new fiscal package for the economy will be significant. "The planned measures will lead to a rise in middle class incomes and create new jobs ? and to a rise in budget revenues, while an increase in the efficiency of the fiscal authority, ANAF, is expected," the Finance Minister, Darius Valcov, said.

Ponta's government is seeking to ease the burden on the population of one of the toughest austerity programmes in the European Union without jeopardising the country's slow economic recovery.

In 2010, the previous austerity government time cut public sector salaries, trimmed public spending and put up taxes.

The Balkan country narrowed its budget deficit to 1.8 per cent of GDP last year, well down from 7.2 per cent back in 2009.

Economic growth in Romania is forecast to stay above potential at 2.7 per cent in 2015 and 2.9 per cent in 2016, powered by domestic demand and supported by the gradual recovery expected in the global economy, an European Commission report said early this month.