Tanasescu intends to cut VAT

Value added tax (VAT) for basic products (food) and electric power is to be cut down in the following months by 2-6 percent, Finance minister Mihai Tanasescu yesterday announced during the hearing that took place within parliamentary Commissions for budget and finances.

“A VAT reduction should have a positive impact on consumers, though this is unlikely to happen,” Tanasescu stated. However, he hopes that, following a dialogue with patronage representatives, the price of the products targeted by the VAT reduction will drop.

As to electric power, the new Finance minister said that he intended VAT cut-down to make up for the increase in the price of electric power, which is to become effective after January 1, 2001.

“Starting with the beginning of next year, the price of electric power has to go up, otherwise it will explode, as it has been artificially maintained at a constant level for the past months,” Tanasescu said.

One of the Finance minister’s priorities for the first part of the year 2001 is to revise global income tax Law. Mihai Tanasescu believes that this “normative document is too stuffy” and is not well prepared.

Consequently, during the first six months of his mandate, the Finance minister intends to make it “more comprehensible, so that everybody can understand it.” The global income tax is to be applied starting January 1, 2001.

As to medium term measures, Tanasescu also aims at updating the legislation in the domain of quotas and taxes. In the long term, he will consider stabilising fiscal legislation and aligning it to European Union demands.

According to Tanasescu, the Public Finance Ministry will draw up the state budget draft law for 2001 at the beginning of January, and will start negotiations with the International Monetary Fund and the World Bank.

The budget for 2001 will be built on an annual inflation rate of 24-30%, an economic growth of 4-5%, an average exchange rate of 28,500-28,700 lei/dollar, and an unemployment rate of 9.5-9.8%.

The Gross Domestic Product anticipated for 2001 will stand at one million billion lei, budgetary revenues will amount to 165,000 billion lei, while budgetary expenses will stand at around 200,000 billion lei, the Finance minister added.