Abstract
The government proposes to increase VAT from 18% to 20% from January 2019. Main objective is to fund the budget as stated in the Presidential May 2018 Decree. According to our calculations, the rate increase will lead to a decrease in GDP, consumption, investments, exports and imports compared to the theoretical economic scenario which envisages no changes in fiscal policy. Still, VAT increase, compared to other possible ways of funding the planned rise in state spending, is an adequate measure of economic policy.
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