Everyone’s life has become more expensive, despite the fact that we have seen the government cut back on business allowances and want to continue this policy, and at the same time taxation on these companies has increased.

“We do not see a decrease in prices on the shelves. We continue to wonder if these goods coming from Ukraine, I mean cereals, agricultural products, do not affect the prices on the Romanian market. Everyone understands that the prices of certain products have fallen, but we don’t find them on the shelf, in the final product,” he said. Feliciu Parasciv, Vice President of the National Association of Small and Medium-Sized Traders of Romania (ANCMMR)at the CLCC conference.

He wonders: why does the price of bread not fall? Why does the price of flour not fall?

“Since August (not 2023), we have been affected by GEO 67 for certain staples, which the government has extended until January 31, and on Monday (January 29) there will be discussions between government officials and traders because they want to extend it and stuff. However, we are saddened by the fact that there are no fewer products on the shelves. We expected a massive drop with the arrival of products from Ukraine,” he said.

What is the reason why prices have not fallen?

“We looked at what was going on and we saw that the cost of economic living had gone up. Society, company, business have life. Companies also consume, produce, have costs. In the cost of living of the company, everything that supports its life is becoming more expensive every day,” said Parashchiv.

He gave an example: companies’ taxes were increased. “There are new restrictions, new rules, new things. All means higher costs, higher costs. This means that the prices applied and the mark-ups have to be higher and higher,” said a representative of small traders.

He reminded that it came into force: “since January 1, the VAT on products with a high sugar content has increased from 9% to 19%.” It also grew in BIO, mountain and traditional foods from 5% to 9%. An excise tax on drinks with high sugar content has appeared. Tobacco excises and taxes on individual micro-enterprises have increased. Taxes have increased for companies operating in the oil, gas, and energy sectors. Bank taxes have increased.”

“We notice some promotions that, being embedded in the life of the company, only make their own life more expensive. This leads to higher prices on the shelves,” he concluded.

How the market reacts to these taxes: a reduction in inflation and a shift to lower quality products

“The market is reacting. We see the phenomenon of shrinkflation. Weight is reduced so as not to affect the price. A chocolate cone weighing 65 grams remains the same package, but inside it is only 55 grams and continues to have the same price on the shelf,” says Parashchiv.

According to him, a phenomenon has appeared when consumers start buying cheaper products.

“If until now we were in the trend when people wanted better and more expensive things for their children, now we notice that we are trying to compensate for the increase in prices by buying cheaper. We can no longer buy better for our children, because the VAT on BIO, mountain and traditional has increased from 5% to 9%,” he explained.

According to him, “the government has raised everything since January 1 and is asking us, retailers, to limit a fairly large category of goods.”

Rising prices affect every link in the chain

Cristina Chonga, Deputy Director of the Forum of Professional Farmers and Processors from Romania he doesn’t think we’ll see the products on the shelves getting cheaper anytime soon.

“And we at APPR discussed the strengthening of the fiscal regime: new taxes on the banking sector, energy, transnational corporations that affect the chain. It is difficult with discounts at the end consumer,” she said.

According to her, every link in the chain is affected by the rise in prices: taxes, fiscal regime, transaction costs.

“The fiscal regime in Romania is unpredictable. As a result, we pay 3 employees who report to the Ministry of Finance at the level of each link in the chain. We can’t imagine that we, as a commercial company, will ever be able to come up with discounts to the next link,” Xionga explained.

Photo source: Dreamstime.com