Bulgaria's FinMin Vows to UK Investors to Keep Taxes Low

Bulgaria's Finance Minsiter Djankov has vowed to keep taxes low at a meeting with British investors. Photo by BGNES

Bulgaria has no plans whatsoever to raise taxes during the lifetime of the present government, Bulgarian Finance Minister Simeon Djankov has told the British Bulgarian Chamber of Commerce.

Deputy Prime Minister and Minister of Finance Simeon Djankov was speaking to the British Bulgarian Chamber of Commerce at a reception in Sofia Tuesday night hosted by the British Ambassador, Jonathan Allen, and Bill Drysdale, Chairman of BBCC.

Djankov met with the members of the British Bulgarian Chamber of Commerce, answering questions of the British businesspeople who are active in Bulgaria.

"25 out of 27 economies in the EU have raised taxes during this crisis. Bulgaria does not intend to," the Bulgarian Finance Minister stressed, as cited by a BBCC release.

He said the Bulgarian economy had undergone painful restructuring during 2009 and 2010, has a very low budget deficit, and is starting to reap the rewards.

He predicted that Bulgaria's GDP growth for 2012 will be above 2%. He expects the final figure for 2011 to be 1.8% - the fourth fastest-growing economy in the EU.

In a sweeping review of the landscape, Djankov talked about Europe's economy, the Greek bailout, EU governments' plans to limit budget deficits, Bulgaria's closest neighbors, and the business environment at home.

On the crisis in Greece, which he described as "one of the major world stories over the past two years" the Finance Minister said that EU finance ministers have now agreed "a reasonably meaningful package" for its rescue. But he questioned whether in the long term this package will prove substantial enough.

He praised a recent EU Finance Ministers' decision requiring member states to make legal commitments to operate within strict budgetary constraints.

This he described as "a golden rule". He expects heads of state to approve it by the end of March, and for this one measure to contribute heavily to the stabilization of the EU economy over the next five years.

On the impact of European events in Bulgaria, he said that besides the crisis in Greece naturally Bulgaria is affected by developments in other neighboring countries as well.

Djankov spoke optimistically about recovery in Romania – also currently under an IMF rescue package – and the reforms made there. "Romania is on the road to recovery."

About Turkey he was more concerned, with GDP growth slowing from the high levels of recent years, a budget deficit in the 4-5% range, and inflation officially measured at 12%.

Regarding the investment climate in Bulgaria, he said his time working at the World Bank taught him that three factors are critical for attracting a steady flow of inward investment: tax policy; infrastructure; and judiciary.

On these, Bulgaria clearly scores well regarding tax, with the lowest rates of corporate and personal tax in Europe – both at 10%.

On the second factor: assisted by EU and World Bank funding, the Bulgarian government has a major focus on improving the country's infrastructure – "both roads and railways will be remarkably better in 2-3 years time" – and is now working on energy infrastructure and the water sector.

The third factor is next on the agenda. He said the judiciary continues to be a concern, and its reform will become the government's next big priority.

Djankov also told the British businesspeople that he is applying pressure on banks to contribute more to Bulgaria's economic growth by increasing lending.

"We have one of the strongest banking systems in Europe measured by liquidity and capital ratios, and deposits are increasing at the fastest rate of anywhere in the EU. But the banking sector is not delivering enough to the business sector," he stated.

Earlier in the meeting, the UK Ambassador said that his government's business priority is emerging markets, including emerging Europe. He and his team are committed to helping generate a substantial growth in trade between Britain and Bulgaria.

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