The VAT increase starting August 1, 2025 represents a decisive measure by the Bolojan Government to reduce the budget deficit. However, beyond the macroeconomic figures, the real impact will be felt in the economy through declining consumption, pressure on supply chains, and the restructuring of business plans in industries most sensitive to price.

According to experts and business representatives, this tax increase is not just a technical adjustment, but a structural change that will directly affect sectors dependent on household consumption. The effects will be felt gradually, throughout the entire economy.

VAT: an indirect tax, but with a direct effect on the economy

Value-added tax is, by its nature, an indirect tax, applied at every stage of the economic chain. Although collected by companies and borne by consumers, its modification creates price imbalances and adaptation behaviors throughout the entire economic system. An increase from 19% to 21% for the standard VAT rate and the replacement of the reduced rates of 5% and 9% with a single level of 11% for eligible categories generate immediate price hikes and directly affect demand.

HoReCa, tourism, and personal services, affected by price increases

Of all industries, the HoReCa sector is undoubtedly the most exposed. After years of fragility caused by the pandemic, fiscal uncertainties, and labor shortages, businesses in restaurants, hotels, cafes, and catering now face an anticipated drop in demand. Romanians will dine out less, give up planned vacations, and cut recreational spending, especially since holiday vouchers have also dropped significantly in 2025.

When prices for food, utilities, and transportation rise along with VAT, the end consumer adjusts their budget, and the first chapter they cut is discretionary spending—HoReCa businesses feel this choice directly.

Domestic tourism, once fueled by support policies such as holiday vouchers, now loses state support precisely when it needs it most. The measure of granting vouchers only with personal contribution and for salaries below a certain threshold is considered by entrepreneurs insufficient to sustain domestic demand.

Beauty sector and car services: personal services under pressure

Among the first categories of services affected by declining consumption are personal ones: barber shops, beauty salons, and car repair workshops.

The decrease in customer volume, combined with rising fixed costs (energy, rents, raw materials), puts pressure on profit margins and may lead to the closure of a significant number of small local businesses.

Production and sales of luxury goods, a sudden slowdown in consumption

Another industry exposed to the impact is that of luxury goods: new cars, motorcycles, cutting-edge gadgets, electric scooters, jewelry, designer clothing. With the VAT increase, these products become even more inaccessible for the population. And in an economy where the sense of financial insecurity is growing, major purchases are postponed.

Statistics support this reality: Overall, the number of new cars registered in the first 7 months of 2025 is 80,615, representing a 15.3% drop compared to the same period in 2024. According to the latest report presented by the Association of Automobile Manufacturers in Romania (ACAROM), national car production recorded a 2.8% decline in the first half of 2025.

Agriculture: an atypical but deeply affected sector

The VAT increase does not bypass agriculture, even if indirectly. According to an analysis by the Chamber of Tax Consultants, the elimination of the reduced rate for agricultural inputs such as seeds, cereals, or bee feed creates distortions in the supply chain and will lead to higher prices for final food products. Moreover, small agricultural producers who are not VAT payers will buy inputs at 21% instead of 9%, which affects the sustainability of rural businesses.

In the absence of a coherent fiscal chain to ensure full deductibility and VAT refunds, the risk of cash flow blockages is major.

IT and automotive industry, large sectors exposed to global trends

Although not directly targeted by the VAT increase, sectors such as automotive and IT are affected by declining demand and the global economic context. IT, once a champion of hiring and investment, is entering a recalibration period, with fewer new centers, fewer open positions, and a focus on efficiency.

In parallel, in the automotive sector, production has fallen and new orders are delayed. Companies in this field feel both the local shock—falling consumption—and external pressures: global slowdown, trade barriers, exchange rate volatility.

According to a Bank of America analysis, the most affected sectors at the European level in the current economic context will be energy and consumer discretionary goods, aligning Romania with the continental trend.

The grey economy, a silent threat

An important side effect of the VAT increase is the risk of migration toward the informal economy. Although fiscal digitalization measures (e-Invoice, SAF-T, e-VAT) limit this possibility, there are still sectors where cash transactions and the absence of fiscal receipts persist.

How long will the austerity period last?

A key question for the business environment is the duration of austerity measures. Tax measures that were meant to be temporary have been made permanent in the past. The lack of predictability complicates budgetary and investment planning.

In this context, tax authorities must regain business confidence through transparency, legislative clarity, and a coherent economic stimulation strategy.

The VAT increase is an economic signal that influences consumption behaviors, investment directions, and the sustainability of already fragile businesses. In a volatile economic landscape, affected sectors will not be able to get through this stage without support, clarity, and solutions adapted to on-the-ground realities.

For Romania’s business environment, this period is an opportunity for recalibration. And the role of tax consulting becomes, more than ever, a strategic one.

If you want to understand the impact of the new fiscal measures on your business or need support in recalibrating your financial strategy, the Cabot Transfer Pricing team is here to help. Write to us and let’s find together the best solutions: https://cabot-tp.ro/en/contact