Bulgaria's Neighbors Romania, Greece Up Value-Added Tax

Mass protests in Greece (above) and Romania (below) have been caused by the implementation of intended financial austerity measures. Photo by EPA/BGNES

Bulgaria’s EU neighbors Romania and Greece are formally increasing their VATs as of July 1, 2010, as part internationally-sanctioned measures to stabilize their state finances.

The VAT in Greece is increased from 21% to 23%, which is the second hike of the tax in three months after it was upped from 19% to 21% in March.

For the first time the Greek state is imposing a VAT on medical services of diagnostic centers in the amount of 10%; on notary and lawyer services – 23%; and on taxi services – 11%.

In Romania, the VAT hike is even steeper – from 19% straight up to 24%.

Romania's Cabinet decided at an emergency meeting Saturday to increase the value-add tax in the country from 19% up to 24%. It also agreed not to increase the flat corporate and income tax currently set at 16%

The VAT hike was made up as a new ways to reduce budget spending after last Friday the country's Constitutional Court rejected the plan envisaging a 15% reduction of retirement pensions and changes of the special pensions of magistrates.

The new financial measures are expected to help reduce Romania's 2010 budget deficit down to 6.8% of the GDP, from 7.2% in 2009, which is a condition for receiving the rest of a bailout loan from the International Monetary Fund.

Also last Friday, the IMF announced that it was putting off the meeting with the Romanian government originally scheduled for June 28 in order to unblock the fifth payment EUR 900 M from an EUR 20 B bailout loan, as a result of the Constitutional Court ruling against the planned austerity measures.

On July 1, Romania is also introducing a 25% tax on sums won from lottery games, and a 16% tax on bank deposit interest income. The salaries of the civil servants are reduced by the staggering 25%.

In the spring of 2010 the Bulgarian government also considered increasing the 20% VAT by 2% to 5% but eventually decided to go for a higher budget deficit. Calls for abandoning the 10% flat corporate and income tax rate in Bulgaria were also rejected.

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