Romania is likely to obtain a derogation from the European Commission (EC) which would enable the application of reverse taxation for cereals and oilseeds for one more year beyond the June 1st deadline, agriculture minister Daniel Constantin said this Tuesday during a Mediafax conference.
Earlier this month the EC has rejected Romania’s request for such a deadline extension which was filed last October, arguing that reverse taxation should not be used to compensate for “inadequate supervision”.
Tax evasion in cereals trading will flourish should Romania not be allowed to continue applying reverse taxation, warned industry representatives earlier this month.
Should a second request for a derogation be denied , “it will be hard because reverse taxation has proved that tax revenues from cereal and oilseed trading have gone up over the past two years. If the 24 percent VAT for cereal will be applied for cereals, tax evasion will surely flourish because Romania is caught between Bulgaria and Hungary who will apply reverse taxation starting July 1,” said Aurel Popescu, president of the Romanian Employers’ League of the Milling, Bakery and Flour Based Products Industry (Rompan) earlier this month.
Romania introduced reverse taxation for cereals and oilseeds in 2011 for a period of two years arguing that this was one of the best methods to fight tax evasion and get rid of “phantom companies” which avoided paying VAT. At that time the government estimated this would help generate state revenues of RON 240 million in 2011 (approximately EUR 57 million) and RON 410 million in 2012 (approximately EUR 93 million).