Bulgaria Govt Levies Luxury Property Tax

Bulgaria's government has approved the so called "luxury tax", photo bg BGNES

Bulgaria’s Cabinet has approved the so called “luxury tax” which will triple dues on high-value real estate, cars, and privately owned yachts, helicopters, and planes.

According to the amendment of the Local Taxes Act, owners of real estate valued at more than BGN 300 000 and cars insured for over BGN 70 000 will be subject to the luxury tax.

The decision is part of the Bulgarian government’s austerity package aimed at battling the economic crisis and rectifying the state budget deficit.

At Wednesday’s meeting, Bulgaria’s Cabinet also decided that all state budget expense will not exceed the amount of state revenues.

According to the Bulgarian Finance Minister Djankov, this is a mechanism to decrease state administration spending by 10% without overstepping the country’s Constitution.

At the end of last week the Cabinet had to give up its austerity measure of cutting state spending on the administration and various state institutions by 10% after a Constitutional Court ruling declared a similar provision illegal.

Minister Djankov went on to explain that Wednesday’s decision to bind expenses to revenues does not mean that a substantial drop in revenues (say by 70%) will lead to a drastic decrease in the money transfers to the ministries. In this way, Djankov hopes to save BGN 450 M from the state budget.

He said that if at the end of 2010 revenues exceed the expected amount, the additional funds will be distributed among the state institutions to make up for the cut.

The Bulgarian government also decided to amend the Political Parties Act to decrease state subsidies to political parties by 15%.

Another new measure that is expected to generate additional state revenue is an amendment of the law on taxes from incomes of physical persons to tax all gambling revenues by 10%.

The government also plans to change the Excise Taxes Act. A fine will be imposed on all who manipulate the mechanical devices for control of excise goods – fuel, alcohol and cigarettes.

All tax legislation changes put forth Wednesday by the Borisov government will have to be approved by the Parliament to be made official.

The center-right government, which swept to power after the July elections, approved last week an austerity package that would help fill a potential gap of BGN 1.6 B. It has pledged to stick to a tight fiscal policy and combat smuggling and tax evasion.

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