Bulgarian FinMin Assuages Fears over Tax Hikes

Finance | June 28, 2010, Monday // 12:11|  views

“Taxes will not be increased even after the country bottoms out from the crisis,” Minister Simeon Djankov said at a meeting with big investors from key sectors in the economy. Photo by BGNES

Bulgaria’s finance minister has denied reports that a hike in the personal tax rate may be looming after the government scrapped its plans for a VAT increase in a bid to plug a budget gap that has thwarted the new EU member's euro efforts.

“Taxes will not be increased even after the country bottoms out from the crisis,” Minister Simeon Djankov said at a meeting with big investors from key sectors in the economy.

He stressed that lower taxes are one of Bulgaria's major advantages as it tries to stay competitive and attract foreign investors.

The comment comes a week after Menda Stoyanova, head of the parliamentary budget commission, said it is very likely that Bulgarians will have to say goodbye to the flat tax.

That was the first time when a high-ranking representative of the ruling center-right GERB party admits a personal tax hike is on the agenda, even though speculations about a possible increase have been going on for months.

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.

Bulgaria, with a 10% flat rate, sill has the lowest personal tax rate among European Union member states, shows a survey of consultancy and audit company KPMG International.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors, KPMG comment.

The highest personal income taxes in the world are still paid by the citizens of the European Union (EU), the survey shows.

But with the introduction of flat rate taxes in a number of Eastern European countries - including Latvia and Poland, which reduced their top rates to 23% and 32% respectively for 2009 - average rates have fallen from 41.1% in 2003 to 36% in 2009.

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Tags: tax rate, corporate income tax, personal, KPMG, flat rate, personal income tax, social security rate, flat tax, Simeon Djankov, finance minister

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