Prominent business people in Romania reacted on Tuesday to attempts by Romanian authorities to debate a possible increase of VAT starting next year. Finance minister Gheorghe Pogea said Tuesday the Government might eye a "reform" of budget incomes, suggesting VAT may rise. And sources told Ziarul Financiar daily, quoted by Mediafax news agency, that President Basescu had admitted on Monday that the VAT may increase in 2010.

UPDATE Romanian PM Emil Boc denied on Tuesday that talks were taking place about a possible VAT increase and said that the Government would maintain the 16% flat tax. "We haven't discussed a VAT increase anywhere - at government level or elsehwere. We did not consider such a measure", Boc said.

According to Mediafax/Ziarul Financiar, Basescu allegedly admitted during talks with foreign investors on Monday that VAT may rise in 2010 as it would be better than other means to improve budget income.

Cezar Coraci, head of the UGIR-1903 employers union, told on Tuesday that consumers would be the first to feel the effects of a VAT increase. He said in the case of a 3% VAT increase prices may rise as high as 5% and the business environment would feel a negative impact indirectly.

For his part, Florin Pogonaru, head of the Association of Romanian Business People (AOAR), said business people are forced to consider a VAT increase in their budget calculations especially following the officials' statements in this regard. He said these statements showed that the economic situation was worse than presented and that the Government was making concessions with trade unions - which needed to be compensated.

Pogonaru said the most important effect of a VAT increase would be rising prices during a period of economic instability.

And the Social Democratic Party - who withdrew from the government last week - said it rejected the option to increase VAT. "It is a bad and risky measure which would blow up the whole country", Mihai Tudose, head of the Economic Commission in the House of Deputies, told

Finance minister Gheorghe Pogea said on Tuesday, quoted by NewsIn news agency, that the Government may consider a "reform of income", suggesting that VAT might increase while the 16% flat tax would be maintained at the current level. Also on Tuesday, Government sources admitted for that the issue was subject of lively debate at the Government headquarters.