Theme: Wednesday, July 31, 2013

PM Victor Ponta: The future of the others from food industry to which we may apply the same system of low VAT depends on the success and partnership between us, the Government and the baking industry producers

Good afternoon. I would like to thank you for the invitation, I am glad that in the end, we have this moment we announced and it seemed it will not come anymore. There have not been easy discussions, really and the two Ministers Daniel Chitoiu fought in the Government and negotiations we had with our international partners for us to succeed to have a general agreement on the introduction of this measure. I think it was the only time during negotiations when I told very clearly: if those from IMF and the EC do not agree with the VAT reduction, then, they should get ready to work with other Government. This measure is far more important than the simple effect on the baking industry. I want us to prove that we are not a country of evasion –makers as described by some inside and abroad, …the problem is when the taxes are too high to be paid in a fair competition.
We are not the only country in Europe that has a differentiated VAT for food products – for bread – but rather, we were the only country-alongside Denmark, if I am not wrong, of the 28 states from EU – where there was not a low VAT for bread. Therefore, we have to prove that when the taxation level is reasonable, we can and we are a country in which producers, traders, including the consumer asking receipt when buying bread – we can pay the taxes to state, understanding that these taxes are necessary to have schools, hospitals, roads and all the other things. I think that 9 percent is a a bearable taxation level, and it would have been better to be lower, but coming from 24 percent, I think it is indeed a mean of backing those who want to do fair business, and want to be fair producers and in my view, to prove that it was a fair measure, that we have less tax evasion and more collections to budget, is a challenge even bigger than the direct simple effect on your industry. I think that, if I had had the graph in which I showed that, as of 2000 onwards, according to taxation, we consume only a quarter of the baking products, perhaps I would have persuaded sooner those from IMF. I do not think that we consume a quarter; I think we consume the same in 2000, only that 75 percent disappeared in the taxed area. When there is such a phenomenon, you try to combat it with tax control, but to combat it upon source, not only at the effect. Secondly, if it proves to be a successful project, and it is a commitment I take – surely, we can extend this system to other food products. The future of the others from food industry to which we may apply the same system of low VAT depends on the success and partnership between us, the Government and the baking industry producers. I speak about meat, other products to which we can enforce the same low VAT system, pursuing the idea of combating the tax evasion, and to have in the end, a fair taxation and competition.
Third thing is a battle we are fighting every day – Daniel Chitoiu, and me, and the Government members – between accounting reality and the reality - reality. It is true that we are losing money, now that we reduced the VAT. We, each time, we say: there are direct economic measures that on paper lead to losses to budget, as there are economic measures which on paper lead to gains to budget, and in reality, this did not happen.
Together with Daniel Chitoiu, we looked at a study which showed that, when VAT grew from 19 to 24 percent, on paper, with five percent points, in reality, the VAT collections grew by 1, 5 percent.
Therefore, we increased on paper by 5 percent, to really cash 1, 5 percent. It is not related to mathematical calculation, with daily reality, and I want to believe that, in partnership with you, I want to make an interministerial working group, with the two Ministers, with employers’ representatives, to see what will happen, in practice, as of September 1, in the implementation of this measure. I do not know if the tax evasion decreases so much, I want it to go down, I do not know whether the bread price will decrease so much – I want it to increase..I think it is possible. I thought of Liviu Voinea who wanted to increase the budget cashing, this is why he did not come here, because he would tell you how to increase upon the cashing part. I think that through the message I conveyed and your involvement, we are likely to prove that it was a successful project. It is not a project – we like to say it is the USL project or the Government’s – it is your project too – you insisted very much and if it has success, it will be equally your success, if we fail, in the end, I think we will all fail, and I want to consider you part of this project, and to understand how important is for other economic sectors, and in the end, for the confidence in ourselves, that we can have economic and tax policies to help economic growth. In the end, I thought – I saw Mr. Adviser too, look, cohabitation functions very well, I deal with the bread, the President with circus, therefore, the entire country will be satisfied. Thank you.