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The VAT Hike in 2010 and Its Effects on the Romanian Firms and their Reaction

Author

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  • Beca Maruºa

    (Bucharest Academy of Economic Studies)

Abstract

This article’s goal is to highlight the main microeconomic and macroeconomic effects of the 2010 VAT hike in Romania and the Romanian firms’ response to it. At 1st July 2010, the Romanian Government raised the Value Added Tax from 19% to 24%, causing chain increases that delayed with nine months the Romania’s exit from recession. It intended to increase its receivables in a period in which the state budget had problems in collecting taxes. I have concluded that the main microeconomic effect was the plunge of the firms’ sales and the macroeconomic one was the decrease of the Gross Domestic Product (GDP). Regarding the Romanian firms’ reaction to the VAT increase, most of them have ignored the VAT hike and they did not have an important response to such a modification.

Suggested Citation

  • Beca Maruºa, 2012. "The VAT Hike in 2010 and Its Effects on the Romanian Firms and their Reaction," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 1003-1007, Decembre.
    • Handle: RePEc:ovi:oviste:v:xii:y:2012:i:2:p:1003-1007
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    More about this item

    Keywords

    VAT; inflation; Romania; tax evasion; GDP;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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