Deloitte expert: I bet the VAT will be raised to 22%

The Romanian Government will most probably opt for raising the VAT from 19% to 22%, even if it would be best to keep tax rates at the current level, say experts from Deloitte Romania, one of the leading fiscal advisory firms on the Romanian market. “I bet a few months ago that the VAT would be raised to 22%. Of course it would be best if it did not go up, but as far as the budget and international competitiveness are concerned, raising the VAT is the lesser of two evils, because it does not entail a rise in production costs,” believes Pieter Wessel, Tax Partner at Deloitte. George Mucibabici, chairman of the company, believes the VAT will go up because it is a rapid solution. “Nobody touches the flat rate. It is a hard-won political victory. On the other hand, raising the VAT is a fast solution, it shelters you from problems for a while, but also has perverse effects.” He explains that IMF experts recommend sustainable solutions with long-term effects, but that because of implementation difficulties, the Government will opt for a rapid solution, like raising the VAT. Romanian President Traian Basescu has recently admitted in a discussion held behind closed doors with foreign investors that the VAT could be raised as of 2010.