Opposition: Bulgaria's Govt Lied about EC Sanctions over Flat VAT in Tourism

Following its EU accession, Bulgaria was expected to capitalize on its tourism industry potential and benefit from the increased exposure and easier accessibility to its markets. Photo by BGNES

The European Commission has not threatened with sanctions Bulgaria's government unless it introduces a flat 9% value-added tax (VAT) in the tourism sector next year, an MEP from the opposition Socialist party claims.

Bulgaria will introduce a flat 9% value-added tax (VAT) in the tourism sector as of the beginning of April next year under amendments that parliament adopted at second reading in the middle of November.

The ruling center-right government of GERB party claimed the introduction of a flat VAT for the tourism sector comes in response to the demand of the European Union that Bulgaria should harmonize tourism VAT, which currently stands at 7% for organized groups and 20% for individual tourism.

It said Bulgaria approached the European Commission (EC) with an inquiry on the possibility to introduce a unified value-added tax (VAT) in the tourism sector from 2012, as proposed by the industry, but the proposal was rejected.

"There is nothing that makes the change in the VAT rate for the tourism sector that urgent," Socialist MEP Kristian Vigenin said, citing a statement of Algirdas Semeta, EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud.

In response to a question by Kristian Vigenin, Commissioner Semeta confirmed that the European Commission contacted the Bulgarian authorities over the issue in question, but did not mention the country has been threatened by sanctions.

The idea for a flat tourism VAT tax has sparked an outcry from tour operators and hoteliers, who called it "ridiculous" since all contract deals with foreign tour operators for the clients' vacations in Bulgaria in 2011 have already been signed and called for postponing the new tax until 2012.

The government has defended its decision by saying this is not a fiscal measure, but a bid to avoid a sanction by Brussels for not putting on a par the two types of tourism - individual tourism and tourism for organized groups.

Tourism is one of, if not the most important industry for the perennially cash-strapped Bulgaria - it not only provides nearly 10% of the country's GDP, but is also a significant source of foreign currency and jobs. The industry has also been traditionally the favorite sector of those in power - it is the only one that enjoys a reduced value-added-tax.

Following its EU accession, Bulgaria was expected to capitalize on its tourism industry potential and benefit from the increased exposure and easier accessibility to its markets, but critics say it never made it to the breaking out of the champagne.

The economic growth that Bulgaria saw over the last few years was built upon the growth in construction, real estate and tourism sectors. The industry says the government should focus its efforts on the tourism sector and introduce a package of anti-crisis measures, now that the construction and real estate sectors are facing a collapse.

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