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Bulgaria Extends Flat-Rate Tax Base

by Ulrika Lomas,, Brussels

15 October 2012

Bulgarian Finance Minister Simeon Djankov has recently unveiled details of plans to impose a 10% tax on bank deposit income and to impose taxes on gambling and stock exchange profits in 2013.

The latest measures form part of efforts by the government to ensure the equal tax treatment of income, notably by means of the flat tax rate. Pensions would not be subject to taxation, however, the minister added.

Defending the plans, Djankov said: “The taxation of deposit interest earnings is not a new type of taxation but an abolition of unjust preference”.

He added: “There should be an equal treatment, which is the idea behind the flat rate.”

According to the finance minister, Bulgaria is the only European Union (EU) member state which does not currently levy a tax on individuals’ interest earnings. The National Revenue Agency collects and sends the tax of the other EU members, while Bulgaria does not collect such revenue from Bulgarian citizens in other states, he added, maintaining that this privilege is “an unjust aspect of the previous reform of the tax system” and should therefore be adjusted, despite the fact that this decision comes “at an uncomfortable time”.

The minister nevertheless insisted that the Bulgarian government would not align its tax rates with those in the EU but would preserve the country’s low taxation.

Djankov anticipates several favourable effects from the broadening of the flat-rate tax base, including notably additional fiscal revenues of around BGN120m (USD78.4m) to cover part of the pension increase. The minister ruled out the idea of deposits and savings being relocated abroad, arguing that most tax rates in the EU are significantly higher.

TAGS: individuals | Finance | tax | investment | interest | gambling tax | banking | capital markets | Bulgaria | gambling | tax rates | European Union (EU) | Europe

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