Prime Minister Ilie Bolojan announced on Wednesday the increase of VAT, despite the call made by President Nicușor Dan for the Government to avoid this measure.
During the government formation negotiations, Ilie Bolojan proposed raising the VAT from 19% to 21%, but President Nicușor Dan opposed it. In the electoral campaign, Nicușor Dan put in writing that VAT will not increase during his presidential term. When Nicușor Dan appointed Ilie Bolojan as Prime Minister, neither of them mentioned the apple of discord – the VAT increase.
The current decision comes in the context of external pressures and the risk of Romania being downgraded by rating agencies, explained the head of the Government.
“The President asked us to do everything possible to avoid raising VAT and to focus on reducing expenses and optimizing investments.
Unfortunately, analyzing the solutions accepted by the markets and holding discussions during this period regarding the fiscal package, we have reached this solution, which the Government assumes,” stated Bolojan at a press conference at Victoria Palace.
According to the Prime Minister, the VAT increase is necessary to avoid a financial crisis: “We must avoid an imminent downgrade risk, which we cannot afford for our country. The damages would be incomparably greater, primarily for ordinary citizens.”
Two VAT rates: 21% and 11%
Bolojan confirmed that the new system will include two VAT rates: 21% (standard) and 11% (reduced).
“We will reset the VAT to two rates. The two rates we propose for resetting are 11% and 21%,” announced the Prime Minister.
Medicines, food, water and sewage services, irrigation water, books, firewood, thermal energy, and the HORECA industry will remain at the reduced rate, at least temporarily.
Prime Minister Ilie Bolojan announced a comprehensive package of fiscal measures that will come into effect on August 1, aimed at reducing the budget deficit.
Among the most important decisions are the increase in excise duties for alcohol, fuels, and cigarettes, as well as the introduction of a health contribution for pensioners with pensions over 3,000 lei.
Starting from January 1, 2026, the Government will increase the dividend tax from 10% to 16% and introduce an additional tax on gains from gambling.
There will be a government meeting on Friday to adopt the regulatory act bringing the fiscal changes, and then Bolojan intends to take responsibility in Parliament at the beginning of next week.
Simultaneously, budget expenditures will be limited, pensions and salaries in the public sector will remain capped until 2026, and the teaching workload will be increased by two hours per week.
A second wave of reforms will be ready towards the end of July, targeting special pensions, state-owned companies, self-financed institutions, and local administration reform. Package 2 will also be adopted by taking responsibility, at the latest in the fall.