Bulgaria Plans to Cut VAT to 17% in 2011Finance | December 22, 2009, Tuesday // 15:39| views
Prime Minister Boyko Borisov attended the official lunch, organized by the American Chamber of Commerce in Bulgaria, dedicated to the country's plans for accession to the eurozone by 2013. Photo by BGNES
Bulgaria's prime minister has announced that Value-Added Tax (VAT), which currently stands at 20%, could be cut to 17% in 2011.
Boyko Borisov spoke at the official lunch, organized by the American Chamber of Commerce in Bulgaria, dedicated to the country's plans for accession to the eurozone by 2013 and the efforts that the state is making to achieve this key goal.
“Bulgaria's accession to the eurozone will release huge financial resources, which are currently used to guarantee the stability of the currency board. This is money, which can be used in the health care system or invested in the construction of highways,” Borissov said.
He pointed out that Bulgaria is the only country, whose outlook was lifted to stable from negative by Standard & Poor's Ratings Services due to its strong track record of prudent fiscal policy and low gross debt.
Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates - between 20 and 24%, depending on income.
After coming into office, the new Bulgarian government announced it plans to keep unchanged the flat income tax rate and cut the Value-Added Tax (VAT) from the current 20% to 18% in 2010 and by a further 2% by the end of the term of office of Prime Minister Boyko Borissov’s administration.
The country will apply in March next year to join the exchange-rate mechanism, the two-year currency stability test prior to euro adoption, and seek to switch to the common currency by 2013.
Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and is conditional on whether the new government will succeed to restore Brussels trust.
The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.