The first measure is the elimination of the reduced VAT rate on agricultural products. The second is the application of a uniform income tax rate to salaried employees and to individuals working in the agricultural sector under special tax regimes.
Both measures will hit agricultural producers and agri-food exports hard, according to Iurie Rija, director of “Agrocereale.”
VAT Increase: Liquidity Costs, Not State Budget Revenues
The association disagrees with the transition of agricultural products from the reduced 8% VAT rate to the standard 20% rate starting in January 2027.
Exports are subject to a zero VAT rate. At the same time, all VAT paid when purchasing agricultural products from farmers on the domestic market for subsequent export remains frozen in the budget until it is refunded to the trader upon actual delivery abroad.
The law provides for monthly and automatic refunds but does not specify a fixed timeframe and does not provide for the accrual of interest in the event of a delay in the refund by the government.
In practice, this means that exporters finance (advance funds to) the government using their own resources, often through bank loans on which interest accrues.
The larger the volume of purchases, the greater the amount tied up, and the more expensive it is to service the bank loans.
Clearly, with a 20% VAT rate, the amount tied up (in the state budget) is several times higher than when the reduced 8% VAT rate is applied. This creates a cash flow problem that directly affects the ability to purchase goods from farmers during the season, when “market responsiveness” is of great importance.
Moreover, in the case of grain intended for export and eligible for a VAT refund, raising the VAT rate to 20% does not generate any additional net revenue for the budget. Meanwhile, maintaining the 8% VAT rate on agricultural products “has a low budgetary cost but protects the sector’s liquidity,” according to Iurie Rija.
One might speculate that a “through” VAT rate of 20% on agricultural products and their processed goods would stimulate domestic processing. But in this case, the key word is “end-to-end”—that is, a balanced rate. And across the entire agri-food value chain, this rate could be either 20% or 8%. Or perhaps a compromise at 12% or 14%.
Small farmers—who are not VAT payers—are also losing out
All farmers—both large and small—have already paid 20% VAT on their production inputs: diesel fuel, fertilizers, and seeds. The government will not reimburse them for any of this.
In this case, the high VAT is also financed by bank loans, the interest on which is paid by the farmer. As a result, the farmer factors all these costs into the price they charge for agricultural products.
Traders must compete with these domestically sourced products in foreign markets, so they are forced to reduce both their margins and their purchase prices. Small farmers will feel the pressure of these circumstances most acutely—when they are selling their harvest and need liquidity.
Thus, the impact does not affect just one party: both the trader and the farmer will have to share the consequences of the liquidity freeze.
“The difference is best illustrated with an example. It’s one thing to buy 1,000 metric tons of sunflower seeds at 10 lei/kg with 8% VAT, paying 10 million lei in total, of which 740,000 lei is VAT. It’s an entirely different matter when you buy the same 1,000 metric tons at a price of 11.11 lei/kg with a 20% VAT rate: the batch costs 11.111 million lei, and the VAT paid will amount to 1.85 million (which, as noted above, may “get tied up” in the state budget). “For that amount, under the current 8% VAT conditions, the trader could use the ‘time the funds are tied up’ to purchase an additional batch of 110 metric tons of sunflower seeds,” notes Iurie Rija.
Inflation Expectations
The proposed reform will also affect the already tense inflation situation. The annual inflation rate in the Republic of Moldova stood at 7.8% in 2025 and will remain at around 6.8% in mid-2026—above the National Bank’s target of 5%.
Under pressure from external shocks, the NBM raised its base rate to 7%—one of the highest levels in Europe. The regulator also revised its average inflation forecast for 2026 upward to 8.1% (from the 4.7% projected before the energy shock and the crisis in the region).
Thus, several factors driving price increases are already in effect, over which the authorities, by and large, have no control: rising prices for natural gas, oil, and fuel; adjustments to electricity and heating rates; and rising fertilizer prices.
The 12% VAT increase on basic foodstuffs, imposed under external pressure, is virtually guaranteed to fuel inflation.
Goods affected by the transition from an 8% to a 20% VAT rate account for between a quarter and a third of the consumer basket, and this increase is fully reflected in the price. According to Yuri Rizi’s calculations, the “gross price” of these goods will increase by approximately 11%. Inflation, already projected at 8.1% for 2026, will rise even further, moving further away from the 5% target.
The Lesson from Romania: A 2% VAT Increase Proved “Sufficient”
Starting in August 2025, Romania unified its VAT rates, raising the tax on food from 9% to 11%. At the same time, the standard rate was raised from 19% to 21%.
The result: in 2025, Romania had the highest food inflation in the European Union—6.7%—compared to the European average of 2.8%. And overall inflation in the neighboring country rose to nearly 11% in mid-2026.
In its inflation report, the National Bank of Romania estimated that, all else being equal, raising the standard VAT rate from 19% to 21% leads to a price increase of approximately 1.83%. Meanwhile, raising the VAT rate on food from 9% to 11% resulted in a price increase of approximately 1.68%.
In addition, the Romanian Competition Council found that some retailers raised prices beyond the level “justified” by the VAT increase. For example, bread prices rose by 2.78%, ground meat by 4.93%, and some baked goods by more than 18%.
“If a two-point increase had such consequences, what would happen if VAT were raised by 12% all at once?” asks Iurie Rija.
Excise taxes and local taxes add to the burden
In addition to VAT, excise taxes on diesel fuel are constantly rising, which directly increases transportation and logistics costs.
At the same time, property and land taxes are recalculated based on cadastral assessments updated to market prices, with local rates set in the range of 0.1% to 1%. This will obviously affect the costs associated with maintaining warehouses, offices, and other real estate owned by agri-food business operators.
Another important aspect: individuals who sell their agricultural produce to companies are taxed as employees. The tax reform introduces a unified progressive personal income tax system—7% for annual income up to one million lei, and 15% for the portion exceeding that threshold.
In other words, a uniform tax system is applied regardless of the taxpayer’s status.
The problem is that the same rate is applied equally to fundamentally different tax bases. A person earning more than one million lei per year effectively receives that amount as net profit. In contrast, a person reporting agricultural revenue exceeding one million lei has only revenue, not profit, which at best amounts to 100,000–200,000 lei per year.
This difference also directly affects the interests of crop producers—individuals who collect produce from numerous households in rural areas and consolidate it for export companies. These individuals operate under a special regime provided for by the Tax Code. Their turnover includes costs for purchasing produce, fuel, transportation, vehicle repairs, and vehicle rentals. After covering these expenses, the actual profit amounts to only a fraction of the turnover.
For example: under the current regime, with a turnover of 1.2 million lei, the final tax withheld at source at a rate of 6% amounts to 72,000 lei per year. Under the new tax model, the same revenue would be subject to a tax of 100,000 lei per year. In other words, the tax burden on this category of individuals working in agriculture would increase by 39%.
This issue will have the most severe impact on the nut-growing sector, particularly regarding the export of walnut kernels. Export companies have, until now, worked quite actively with individual farmers. Meanwhile, walnut kernels are a high-value product, meaning the 1.2 million lei threshold (for taxation at a reduced rate) will be reached quickly—it is equivalent to the sale of approximately 11–12 metric tons of walnut kernels.
Taxing turnover as if it were wages not only contradicts the principle of tax fairness. The predicted result is that the chain linking small agricultural producers and export companies will be severed.
ABalanced Decision
“Taken together, the proposed changes simultaneously affect exporters’ margins, operating liquidity, and purchasing power. A trader with less liquidity buys less, later, and at lower prices. Moldova’s agricultural exports, a key component of the country’s trade balance, will become less competitive.
Our association’s demand is balanced and well-founded: maintaining the 8% VAT rate on agricultural products, maintaining the reduced tax rate on agricultural machinery, and maintaining a special tax regime for individuals working in the agricultural sector,” “summarizes Iurie Rija, director of Agrocereale.”
