AN ANALYSIS OF THE EVOLUTION OF THE VAT RATES IN ROMANIA, IN RELATION TO THE EFFICIENCY OF THIS TAX
AN ANALYSIS OF THE EVOLUTION OF THE VAT RATES IN ROMANIA, IN RELATION TO THE EFFICIENCY OF THIS TAX

Author(s): Costel Istrate
Subject(s): Accounting - Business Administration
Published by: Editura Universităţii »Alexandru Ioan Cuza« din Iaşi
Keywords: VAT efficiency; VAT rates; fiscal revenues; Romanian fiscal system;
Summary/Abstract: Value added tax (VAT) is the tax with the largest contribution to the realization of revenues of the state budget of Romania, currently reaching over 6% of GDP, but also going through percentages that have often exceeded 8%, a situation comparable to that of most former communist states in Eastern Europe. However, unlike these other states, Romania seems more dependent on VAT. VAT is a tax that has undergone many legislative changes, especially in the last decade. The two increases in the standard rate, which occurred during periods of financial crisis (1998 and 2010), immediately increased the share of VAT revenues in GDP, but did not contribute significantly to the change in the efficiency of collection, calculated by indicators such as VAT C- efficiency or VAT Revenue Ratio. On the contrary, the first decrease in the standard rate (from 22% to 19%) immediately led to an increase in collection efficiency, without a decrease in the share of VAT in GDP. The second decrease in the VAT rate (2016) does not change the efficiency of collection at all, but leads to a decrease in the share of VAT in GDP. Comparing the situation of Romania with that of some former communist states in Central and Eastern Europe, we find that we have a rather low collection efficiency, in this case, below average.

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