Bulgarian Govt Rejects VAT Rise

by Ulrika Lomas, Tax-News.com, Brussels

06 May 2010

Bulgaria’s government has recently confirmed that it does not plan to raise value-added tax (VAT) this year, electing instead to embark on a series of rapid reforms and extensive savings plans - the more difficult path – in a determined effort to cut costs and to redress the country’s finances.

Despite a number of suggestions that the 20% rate of VAT might have to rise in Bulgaria by between 2% and 4% in order to generate additional fiscal revenue for the state, any such proposals provoked fierce criticism from the private sector and from trade unions alike, even prompting Bulgaria’s Finance Minister Simeon Dyankov to threaten his resignation if taxes were indeed increased.

According to Prime Minister Boyko Borisov, the government now aims to undertake a series of structural reforms in healthcare, education, pensions and administration, saving an estimated BGN900m (EUR460m) by the end of the year. The government is also expecting to raise an additional BGN500m from taxes imposed on tobacco, alcohol and fuel.

The latest decision marks a significant about-turn for the government, as Borisov had only very recently announced plans to increase VAT in order to plug the budget deficit as a result of dwindling tax revenue.

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