Bulgaria PM Vows to Increase VAT If Anti-Crisis Program Fails

Bulgarian PM Borisov (right) (shown here with Rosen Plevneliev, Regional Devt Minister) is ready to up the VAT when needed. Photo by BGNES

Bulgaria’s Prime Minister Borisov has not ruled out upping the country’s value-added tax from 20% to 22%.

Speaking on bTV Tuesday morning, Borisov declared that if the package of 60 anti-crisis measures adopted in early April by the government fails to produced the desired effect, the VAT increase will be put immediately on the table.

In order to rectify the dire situation of Bulgaria’s 2010 state budget as the state revenues were much lower than expected in the first quarter of the year, the Borisov government went for the anti-crisis program including measures such as privatization of state assets, cutting budget spending through administrative layoffs, and sale of Bulgaria’s free greenhouse gas emissions quota.

The government is hoping that the measures will have a combined effect of BGN 1.6 B, as the state budget deficit has emerged with a BGN 1.5 B gap in the first three months of 2010.

The increase of the VAT by 2% - from 20% to 22% - for a period of one year - has been discussed in March but has been severely criticized by economist and politicians alike. It would be running counter to the declared intention of the ruling GERB party to reduce the VAT down to 16% by the end of its term in 2013.

Bulgarian Prime Minister Boyko Borisov has made it clear in March and April that he would not hesitate to move to increase the VAT by 2% if he had no other option, and that he would be ready to do it without any discussions if the fortunes of the state necessitated such an unpopular move.

The ruling party GERB had come under criticism by its partners from the Blue Coalition for allowing the trade unions and the country’s major employers organization to have a very strong voice in the drafting of the anti-crisis measures.

On Tuesday, Borisov made it clear that he would go for the VAT increase the moment there might be evidence that the anti-crisis program of his government is not having sufficient effects on reducing the budget deficit.

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