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Romania – EHS Candidate for Reform

Pesticide subsidies

In 2007, Romania introduced a pesticide subsidy to help lower production costs for farmers. The pesticide subsidy works by implementing a lower VAT rate of 9% for pesticides and other plant protection products, compared to the standard VAT rate of 19%. This subsidy primarily benefits farmers, as well as people in the forestry and chemical production sectors. Other countries that also have lower VAT rates for pesticides include Austria, Belgium, Bulgaria, Croatia, Cyprus, France, Ireland, Italy, Poland, Portugal and Spain.

© Shad Arefin Sanchoy / Unsplash

While there is no exact data on the budget impact of the pesticide subsidy, it is estimated that the tax revenue shortfall was EUR 86 million in 2019 and EUR 66 million in 2020. If the subsidy were removed, prices would increase by 9.17%, and demand would decrease by 2.93%. This would result in a reduction of approximately 265 tons of pesticides used each year.

The reduced VAT rate has both health and environmental impacts. Pesticides carry human health-related risks, and the removal of the subsidy could reduce the yearly pesticide-related health costs by EUR 95 million. The environmental impacts of this subsidy include soil degradation, surface and groundwater contamination, air pollution and overall ecosystem degradation. The reduction of habitat and food quality and availability results in decline in the biodiversity of land and water species.

Several EU-level reforms are proposed that target reducing pesticide use to help mitigate the environmental and human health-related risks. Other European countries have undergone pesticide subsidy reform. Overall, pesticide use in Romania has been slightly declining over time, and there are currently no plans to reform the reduced VAT rate. For a successful subsidy reform in Romania, it is suggested that flat payments and expanded support mechanisms are offered to farmers while pesticide use is reduced. Another option includes offering efficiency-inducing payments or investing in agricultural practices and innovations that are more environmentally friendly and efficient.

More information on pesticide subsidies and other candidates for reform in Romania and other Member States can be found in the country case studies and factsheets compilation.