Local retailers report that, following the reduction of the VAT, starting on 1 June 2015, their meat sales have increased by between 5% and 10%, according to data obtained by local business daily Ziarul Financiar.
This marks a solid improvement in the Romanian market which has been seeing a continuing decrease in sales over recent years. In 2009, an average Romanian consumed some 70kg of meat per year. However, this has decreased to only about 58kg per capita in 2015.
The latest results indicate that the reduction contributed to the Romanian government’s aim of stimulating the country’s lagging consumption of meat. The measure was designed in cooperation with local industry representatives and the Romanian Meat Association (ARC) which has been lobbying for a reduced VAT on meat since a similar move was made by Bucharest to support the Romanian baking industry. In September 2013, the government decided to reduce its tax rate from 24% in 9%, a measure which has resulted in increased sales.
In addition to boosting weakening consumption, the decision is also intended as a means of combating tax evasion, which has been plaguing the country’s meat industry. Earlier this year, Liviu Harbuz, deputy head of the Agriculture Commission at the Romanian parliament and an MP for the ruling Social Democratic Party (PSD), said the problem impacts on as much as 40% of Romanian meat sales, representing €1.5 billion.
On a related note, Radu Timiş, head of the ARC, told local news agency Mediafax that, between May and July 2015, Romanian meat processors increased their output by 15% as a result of the improved forecast for domestic meat sales.
“Moreover, there has been a decrease in cases of illegal meat imports that avoid taxes. Before the reduction, we were flooded with poultry meat transported by big trucks, and now there are far fewer and smaller vehicles with a capacity ranging between 1.5 and 3 tonnes,” Timiş said.
According to the association’s head, Romanian meat sales are expected to further improve in the next six months, and they will most likely exceed the estimates from June and July.
Prior to the move, the ARC had been lobbying for the measure, claiming it would allow the industry to lower the prices of meat and processed meat products, as well as combat unemployment and generate additional revenue for the country’s budget.
Decreasing the VAT is expected to generate “an estimated €160m of fresh revenue for the state budget”, the association said in a statement.
Established in 1999 and headquartered in Bucharest, the ARC said it represented the interests of about 50 member companies with an aggregate 60% stake in the Romanian meat industry’s total output.