Romanian government hopes to substantially reduce tax evasion by cutting the bread VAT (Value-Added Tax) from 24 percent down to 9 percent, Daniel Constantin, Minister of Agriculture and Rural Development, said Wednesday.

According to him, bread consumption in Romania fell from 1.8 million tonnes in 1999/2000 down to 588,000 tonnes in 2010, after two VAT increases.

"If in 1999 and 2000, when the decision was made to increase the bread VAT from 11 to 19 percent, bread consumption in Romania stood at 1.8 million tonnes, in the next four years, while the 19 percent VAT was being in use, the bread consumption fell down to a half, that is to 840,000 tonnes. This was until another decision was made and the VAT increased from 19 to 24 percent, while consumption fell down to 588,000 tonnes," said Constantin.

According to him, bread consumption per capita in Romania is currently less than 30 kg per year, compared with the European average of 80 kg per year, with the difference being reflected in the amount of tax evasion in the field.

The minister underscored that the annual loss to the state treasury from VAT and other taxes in the milling and bakery industry reach up to 1.5 billion lei (452 million U.S. dollars).

The minister hoped that the effects VAT-cut will be seen first of all in a fair competition environment, with higher budget revenues too.

Romanian government on Tuesday adopted the simple ordinance on cutting the bread VAT down to 9 percent and the measure will come into force as of Sept. 1.

Prime Minister Victor Ponta stated that the VAT will be cut back in the case of certain foodstuffs, as early as next year, provided that the measure applied to bread proves successful.

"I count on a partnership between the government and producers that will prove what I have claimed all along that a 9-percent VAT does not mean less revenue for the government, but fighting against tax evasion, and even additional revenue or a drop in bread prices," he told the cabinet meeting which adopted the ordinance on cutting the bread VAT. Endi

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