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Romanian senators passed yesterday "the Voiculescu law" to cut on the 19% VAT (value added tax) to 9% in the case of basic food products such as bread, bakery, meat, fish, milk, sugar, rice and eggs.

The Conservatives could see their dream come true, although the Executive had claimed they were not for the project. The PC (Conservative Party), the PD (Democrat Party), the PSD (Social-Democrat Party) and the PRM ("Great Romania" Party) played together and due to their 65 votes they defeated the Liberals and the UDMR (Democrat Union of Magyars in Romania) representatives, who voted against the law.

Parliamentary sources claim the Conservatives' victory is because of Dan Voiculescu's meeting with Democrat leader Emil Boc, whom he persuaded into thinking that vote for this project actually meant vote against the Executive and PM Tariceanu. (...) (V.D.)

Vladescu: A decision with perverse effects

Finance minister Sebastian Vladescu comments that the Senate's decision to cut down on the VAT set for basic food products is a populist measure "with perverse effects".

He explains: "Since we want to have a long-term tax and fee system, this populist decision isn't obviously the best. I think it can have perverse effects in time and the latter can do away with the eventual positive effects."

According to the finance official, to maintain the present system such as it is and such as the Executive wishes is "what people and businessmen want." Vladescu opines that the low VAT rate seems to have positive effects, but it favors only superior profit and fiscal evasion. He says this is why the Ministry of Finance is against it.

The official adds experience has it that in Romania prices don't go down when there is tax cut. (...) (L.M., A.G.C.)

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