The proposal to implement a generalized reverse charge VAT mechanism as a solution to Romania’s VAT collection gap may result in lower, not higher, budget revenues and reflects a misunderstanding of how the system functions, according to tax consultant Mariana Vizoli, quoted by Profit.ro on June 18.
Vizoli, a former head of VAT policy at the Ministry of Finance with 18 years of experience, responded to recent public arguments in favor of the mechanism, which tax expert Gabriel Biriș has promoted.
The reverse charge mechanism shifts VAT payment responsibility from the seller to the buyer. In its generalized form, it would eliminate VAT payments along all stages of the supply chain.
According to Vizoli, this approach could pose significant risks to revenue collection. “If the last link in the supply chain is a company that becomes insolvent—a common occurrence—then the VAT owed to the budget is often lost permanently,” she warned. In such cases, even if the bankrupt company collected VAT from final consumers, such as individuals or non-VAT-paying institutions, it may have failed to remit those amounts to the budget before entering insolvency.
She noted that unpaid VAT debts become part of the insolvency process and are frequently written off during reorganization. “This means that VAT already collected from consumers may never reach the state,” Vizoli said.
She argued that the standard VAT system, which ensures VAT is collected at each transaction point in the supply chain, was introduced specifically to avoid such risks. It replaced the old ICM (tax on the circulation of goods), which only applied VAT at the final transaction stage and proved vulnerable to fraud and non-payment.
“The VAT system based on fractional payments ensures better control and greater resilience against tax evasion,” Vizoli concluded.
While the reverse charge mechanism is currently applied in specific high-risk sectors in Romania, any extension would require approval from the European Commission. Tax authorities continue to explore measures to reduce the VAT gap, one of the largest in the EU, but experts warn that structural changes should be carefully evaluated to avoid unintended fiscal consequences.
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iulian@romania-insider.com
