Bread will cost 15 percent less should the VAT be reduced from 24 percent to 9 percent starting this July, said Aurel Popescu, president of the Romanian Employers’ League of the Milling, Bakery and Flour Based Products Industry (Rompan).
“In our stores we will do this, we will reduce the price of bread if the VAT will be cut to 9 percent”, said Popescu during a meeting of the Competition Council according to Mediafax.
Present to the same event, Alexandru Vlad, the vice president of the Romanian Association of Large Retailers and general director of Selgros said stores should also cut prices. “The market is difficult and the only thing left to do is to reduce the price of bread”, he said.
However, not everyone agrees that a lower VAT for bread products will necessarily lead to price cuts.
The government’s plan to cut VAT for bread from 24 percent to 9 percent is entirely a political measure meant to reduce the burden on Romanian consumers, said Alex Jurconi, president of the Pro Agro federation during the third edition of the Focus on Agriculture event organized by BR this Monday. He added that the measure will not lead to reduced prices, at least not at the producers’ level.
The measure could be introduced starting July following the budget rectification, and will apply for the entire production chain – wheat, flour and bread. In order to apply the VAT cut, the government has to come up with RON 250 million (approximately EUR 56 million) which represents the estimated loss to the state budget following the tax cut.
While IMF representatives have previously said differentiated VAT quotas will reduce tax revenues, the Romanian government is confident the measure will help fight tax evasion – which for bread is estimated to reach a whopping 70 percent – and actually generate more cash to the state budget.