Bulgaria Mulls Cut In Corporate Tax

by Ulrika Lomas, Tax-News.com, Brussels

03 January 2006

After postponing tax cuts last year, the Bulgarian Finance Ministry has indicated that the government is willing to explore the possibility of reducing taxes on business in the coming year, should the fiscal situation permit it to do so.

In a statement, the Finance Ministry revealed that more precise details will become apparent mid-way through next year after the first draft budget for 2007 has been completed.

However, Finance Minister Plamen Oresharski has stated that one of the government's specific aims is to cut the rate of corporate tax, which is currently levied at 15%.

The Bulgarian government had initially planned to cut corporate tax to 12% last year, but a month before parliamentary elections were due to be held in June 2005 former Finance Minister Stamen Tasev abruptly reversed the policy and kept rates on hold, explaining that the decision would help the next government "independently choose its budget policy".

Draft legislation also called for the tax system to be simplified, and for value added tax to be cut by 2% to 18%. However, Oresharski has warned that the government may be forced "as a last resort" into raising the rate of VAT above 20% if it fails to prevent a further widening of the deficit.

Bulgaria has aspirations to join the European Union in 2007 and therefore must keep a firm grip on its fiscal policy.

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