Bulgarian Parliament Adopts 'Tight' 2012 Budget

by Ulrika Lomas, Tax-News.com, Brussels

16 December 2011

Following a lengthy debate, Bulgarian lawmakers have finally adopted the country’s 2012 budget bill, designed to reduce the deficit, to minimize the effect of the ongoing eurozone sovereign-debt crisis on the economy, and to guarantee debt repayments in 2013.

The budget anticipates economic growth of 2.3%, revised downwards from 2.9% expected initially, and for a budget deficit of 1.35% of gross domestic product (GDP), down significantly from 2% this year, and from 3.9% in 2010. It also provides for inflation of 3.2%.

The state anticipates fiscal revenues of around BGN15bn (USD10bn) in 2012.

Under the plans, the Bulgarian government will maintain both corporate and personal income taxes, the lowest in Europe, unchanged next year at 10%, in a bid to attract foreign investment.

The government also plans to align national tax legislation with European Union law and to improve existing tax laws in Bulgaria next year.

Other measures contained in the budget include plans to increase the minimum wage from May 1, 2012, and to progressively increase the retirement age in Bulgaria.

At the beginning of November, when details of the budget were first unveiled, Bulgarian Finance Minister Simeon Djankov acknowledged the fact that it is a “tight budget” and that next year will be a financially difficult year, although stressed that the budget is expected to work even if economic growth is subsequently revised downwards to either 1% or 2%.

The International Monetary Fund (IMF) downgraded its economic growth forecast for Bulgaria for this year from 3% to 2.5%.

The government aims to balance the budget in 2013.

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