Romania to raise VAT to 24 pct to curb deficit (court blocked attempt to cut pensions by 15%)

AFP on Yahoo ^ | 6/26/10 | AFP

[NormsRevenge]

BUCHAREST (AFP) – Romania will raise the VAT tax levied on goods and services to 24 percent from 19 percent to curb the public deficit and obtain a crucial IMF loan disbursement, Prime Minister Emil Boc said on Saturday.

The move comes after a court on Friday blocked the government's plan to cut pensions by 15 percent in 2010, leading the International Monetary Fund to postpone the unlocking of a new tranche that was due on Monday.

"The government has decided to raise the VAT tax by five points", Boc told a press conference.

"Under these conditions, the agreement with the IMF will continue", he said, adding that the IMF board was now expected to meet on Wednesday to give the green light to a new disbursement for the crisis-hit Balkan country.

Romania has previously agreed with the IMF and the European Commission to narrow its public deficit from 7.2 percent of output to 6.8 percent in 2010.

The VAT-tax hike will be implemented from July 1, Boc said. It should ensure between 3.5 to 4 billion-lei extra revenues in 2010 (820 to 940 million euros), Finance minister Sebastian Vladescu told reporters.

[dfwgator]

Won’t people just more buy more stuff in other countries that don’t have the high VAT?

[craigster_nc]

Yep, all the unemployed wouldn’t have any pollution to deal with at all. A perfect utopia. People just sitting around sucking clean air waiting for their government checks to clear the bank someday. ;-)

[OldDeckHand]

"Drug dealers don't pay income taxes on the drugs they sell, but they would pay VAT on the food and bling they buy. "

Are merchants allowed to write-off their sales of products to drug-dealers? Of course not. So, the government is already capturing a revenue stream from those transactions by way of income tax paid by the merchants, are they not?

Perhaps one could make a meritorious argument about a national sales tax in lieu of an income tax with respect to capturing revenue from illicit activities. But, a VAT is a tax that is levied in addition to an income tax. As such, I believe the negative effects of such a tax on the larger economy far outweigh the benefits of such a tax with respect to the "black market", IMHO.

[NormsRevenge]

http://www.freerepublic.com/focus/f-news/2542211/posts
Romania pension cut ruled illegal
BBC News ^ | June 25, 2010

Posted on Saturday, June 26, 2010 11:15:09 AM by Cheap_Hessian

A top court in Romania has ruled out a pension cut demanded by the country’s government as part of a deficit-cutting financial austerity measure.

[GeronL]

They should chop off 15% of the government employees to save money then.

[onona]

5%.......that’s a BIG ouchie !

[tcrlaf]

Bulgarian, Ukrainian and Moldovan smugglers thank the government heartily.

[tcrlaf]

Bulgarian, Ukrainian and Moldovan smugglers thank the government heartily.

[The Duke]

...coming soon to a foolish nation near you!

[hinckley buzzard]

Yes, this is the fatal flaw in VAT. It has no ceiling except what the traffic will bear.