IN ORDER TO FIGHT TAX EVASION, The Romanian government wants to implement reverse taxation on the grain market

• The new tax measure may become applicable in time for the spring harvest • Tax evasion in the sector is estimated to exceed EUR 2 billion

The state wants to implement reverse taxation to cut tax evasion in the sector, which according to some estimates, exceeds 2 billion Euros.

Reverse taxation involves having the VAT only be included in the retailer"s invoice, thus eliminating this provision from the relationship between producer and processors. In many cases, producers sell grain without issuing invoices, as companies want to avoid paying 19% VAT.

The Ministry of Finance took the necessary actions with the European Commission for the implementation of this measure, sources from the management of the Ministry of Finance told us.

"We are always consulting with the officials of the European Commission on this matter and we are expecting to receive an answer from them soon", the quoted sources said.

For economic agents operating in the grain market, the new fiscal measure is acceptable, given the fact that the Government refuses to cut VAT for grain (ed. note: from 19% to 5%, as requested by grain producers and processors).

"Reverse taxation is an acceptable measure to lower tax evasion, since the Government refuses to lower VAT for grains, which in our opinion is the only way to efficiently fight tax evasion in this sector", said Viorel Marin, the chairman of the Romanian National Association of Flour Milling and Baking Industries (ANAMOB).

However, Viorel Marin said that reverse taxation is not without its limitations, since it will only solve the issue of tax evasion on one of the two ends of the trade circuit: "The implementation of this measure will only eliminate < upstream > tax evasion, that is at the beginning of the trade chain, meaning on the segment between manufacturers and processors. There will still be issues but they will be easier to manage by investigative bodies".

Reverse taxation may become applicable starting with this spring"s harvest, subject to approval by the European Commission.