Effects of Value Added Tax (VAT) Reduction on Tourism in Romania

The Romanian tourism is a controversial and current topic, which is one of the sectors with high potential for economic growth and development at national level. Introducing the fiscal relaxation-in the tourism sector (VAT - value added tax-from 24% to 9%) for all accommodation services, for "all inclusive" services, starting from January 2015 may lead to stimulate the tourist demand and thus economic growth. In this article, we shall analyze the impact of VAT reduction to 9% at one year from implementation and its effects on the current situation of the tourism sector in Romania, based on the statistical data available at national level. In order to highlight the aspects related to the benefits that such a measure may have on the national economy, we conducted a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats), by which we updated the strengths, weaknesses, opportunities and threats in this sector, in order to formulate some recommendations, so that the Romanian tourism becomes competitive and visible at international level. The conclusions after analyze, highlight the idea that introducing fiscal relaxation in tourism brings contributions to the development of this sector, which may compensate the budget deficit through revenue increases brought by increasing the tourists flows.