Romania’s attempt to lower deficit: Taxes surge, fuel prices spike, and free healthcare benefits slashed
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Romania saw a sharp rise in fuel prices and a VAT increase on Friday as the first wave of the government’s deficit-cutting measures took effect.
The coalition government, led by liberal party president Ilie Bolojan, announced on 7 July its intention to slash the country’s ballooning budget deficit, which exceeds 9% of GDP. The primary focus of the measures is to boost state revenues. Despite attempts by the opposition to block the initiative through a no-confidence motion and a constitutional appeal, the legislation was signed into law last week by President Nicușor Dan and came into force on 1 August.
VAT and fuel prices on the rise
As part of the new legislation, Romania’s standard VAT rate increased from 19% to 21% on 1 August. Several previously lower-taxed goods and services also saw increases. The VAT on food, medicines, firewood, thermal energy, books, newspapers, cultural services, drinking water, sanitation, and hospitality services rose from 5% or 9% to 11%.
Excise duties on alcoholic beverages, sugary soft drinks, and tobacco products were raised by 10%, leading to several percentage points’ increase in retail prices.
Fuel was also affected: the excise duty on gasoline and diesel increased by 10%, resulting in a price hike of around 40 bani (HUF 31.5) per litre. At a Petrom gas station in Bucharest’s Sector 6, the price of standard diesel rose from 7.37 lei to 7.81 lei per litre, according to Economica.net.
