Bulgarian Flat Tax Gets Go Ahead

by Carla Johnson, Investors Offshore.com, London

27 November 2007

It has been announced that Bulgaria's parliament has approved proposals to implement a 10% flat tax from the beginning of next year.

Once it commences it will officially be the lowest flat tax rate in place in Europe, and one of the lowest throughout the world.

The flat tax is set to replace Bulgaria's current progressive system of taxation, but deductions will be permitted for certain categories of employment.

However, there has been much debate since the decision was announced, and Socialist MP Georgi Bliznashki has hit out at the pronouncement, stating, according to the Sofia News Agency, that: "This tax system will further deepen the social inequality in Bulgaria."

Former PM Ivan Kostov and leader of the rightist Democrats for Strong Bulgaria (DSB) party has defended the decision, though, arguing that implementing this new system of taxation is the only way to get the country's rich to pay their taxes.

The change in taxation is also expected to have a positive impact on future foreign investment opportunities from other countries, as it increases transparency.

Bulgaria is the latest of the former Soviet republics to opt for a flat tax, following in the footsteps of Estonia, Slovakia, Romania and Albania.

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