By increasing VAT, the state can save more money from strong investors targeting Romania, because well-developed companies pay VAT regardless of its value, but in the event of a long-term destabilization, their investments in Romanian economic products may be affected.
For the Small Companies
Small companies or those that did not have a well-developed business plan and that would not have survived too long on the Romanian market will disappear due to a good management plan, the impossibility to access investment funds from banks and due to the decrease of the demand on the consumer market, due to the increase of taxes, which is observed in the increase of prices.
- The increase of VAT can determine foreign investors and buyers to avoid paying in Romania this tax in favor of another country where VAT is lower, thus, the increase of VAT can lead to imported inflation.
- The increase of VAT leads to the decrease of consumption for both basic products and luxury products.
- Although the increase in VAT may replace the decrease in consumption which is inevitable, taking into account the conditions on the labor market, the savings in the state budget resulting from the application of the VAT increase may not occur. As you can make use of the calculate sales tax you can find the best results.
Many Saving Solutions
Saving money from the state budget can be done only if the controls of the institutions responsible for verifying compliance with legal provisions on taxation will intensify, otherwise risking the development of the underground economy.
The reduction or maintenance of VAT at 19% could have meant the decrease of the expenses from the unemployment insurance budget by the beginning of the economic recovery and by the use of money, according to the provisions of Law 76/2002 on the unemployment insurance system, for financing a new business or feasibility studies.
Sustainability of new business plans
Due to the fact that the production in the country decreases, and around Romania there are countries with lower trade taxes, the import can develop.
Increasing VAT can increase prices, and in the current situation, when unemployment is rising and living standards are falling, the level of spending is higher than the state budget would allow, the level of inflation and economic development may still be in jeopardy.
Conclusion
Value added tax is used more indirectly to influence the economic environment. This influence is achieved through consumption, thus generating a pressure on supply or a relaxation of it, depending on the objective needs of the state. These needs depend mainly on the financing of the budget, and then we need a large levy quota, or they also depend on investments in the region, in which case a small quota would be preferable. These two objectives need to be achieved by using the dimensions of the quotas at opposite poles.