Government of Romania mulls over increasing Value-Added Tax (VAT) to 23% as a potential extreme solution for 2026
Romania's governing coalition is deliberating a potential increase in the value-added tax (VAT) rate to 23% in 2026, as the government seeks additional funds to address the fiscal strain. This proposal comes amidst several tax increases already implemented this summer.
The HoReCa (Hotel, Restaurant, Café) sector is among those affected by the proposed changes to the corporate tax law. Currently, the VAT rate for the HoReCa sector stands at 11%, but discussions are underway to potentially increase it to 21%.
Recently, hoteliers have warned that 2025 has been the weakest year in the last three for the HoReCa sector. This concern adds to the government's pressure to find a balanced solution that considers the sector's challenges.
Another option under discussion is aligning the VAT rate for the HoReCa sector with the standard rate. Regardless of the decision, no final decision has been made regarding the VAT increase, and discussions may intensify based on the economy's performance in the coming months.
Besides the HoReCa sector, rising expenditures, particularly on defence, add to the fiscal strain. Starting from next year, the budget deficit must be further reduced according to the plan agreed with the European Commission. The government's projections assume that public sector wages and pensions will remain frozen in 2026.
Despite these tax increases and budgetary measures, the government still needs several billion lei for budget rectification. It remains to be seen how these discussions will unfold and what impact they will have on various sectors of Romania's economy.
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