There is a trend taking place that is seeing tax shifted away from income and labor, and onto consumption, which seems to be a good thing. Even though consumption taxes tend to be regressive, a lot of economists agree that this tax shift will encourage economic growth and secure governments’ tax bases. Yes, Romania has just bucked the trend, but that may be to its competitive advantage. Few countries in the EU now have standard rates of VAT of less than 20 percent, and many have pushed VAT rates well above that level.
Most of the countries that have recently increased VAT did so in response to the calamitous effect the financial crisis had on national budgets. Now things have stabilized somewhat, few have shown much inclination to reduce VAT rates, except Romania. But maybe its decision to cut VAT will … Read More »