Basescu Says VAT Increase ‘A Political Error’

05.19.2011 By Florentina Dragu

Romanian President Traian Basescu on Thursday said that raising the value added tax rate to 24% from 19% was a “political error” that delayed the country’s exit from recession by at least six months.

Basescu told an economic seminar organized by Ziarul Financiar that the government should have decided to tax pensions temporarily instead of increasing the VAT rate.

Romanian authorities introduced the higher sales tax rate in July last year, after the Constitutional Court rejected a 10% cut in pensions that was supposed to reduce public spending and help jumpstart the economy.