Bulgaria Banks Mull Ways to Cushion Deposit Tax Blow

Bulgarian banks plan to offer customers roundabout services to cushion the impact of the new 10% levy on people's income on their bank deposits, which is expected to come into force from next year.

"Banks will offer legal alternatives so that this tax can be reduced or avoided," Levon Hampartzoumian, CEO of UniCredit Bulbank, told the morning broadcast of Nova TV Channel on Wednesday.

"If, for example, the client is obliged to bring in the budget 10%, the bank may offer an alternative that will cost him only 2%," he added.

Hampartzoumian vehemently rejected the government's argument the new levy will force richer people with huge bank deposits to pay tax on that income, hinting the move is pure pre-election gambit.

"Who are those rich people? Those, who fill up the columns of lifestyle magazines and show off their flashy lifestyle because they live on credit? Or those, who have long ceased to pay taxes because they have transferred all their money to some sunny island?"

Bulgarian finance minister has made clear his strong determination to push through parliament the proposed 10% tax on bank deposit income from next year.

According to Mininster Djankov in this way the country will join the European banking system, be able to collect taxes on the income from deposits and investments of Bulgarians abroad and improve social inequality.

Bulgarians will be obliged to include the income on bank deposits in their tax declarations a year later – in 2014 – after the taxation process is streamlined, the finance minister has suggested.

Djankov has agreed that the introduction of a tax-free threshold is a good idea, but said it was too early to discuss it.

Both economists and the central bank have slammed the government's decision to introduce a 10% tax on bank deposit income, saying this would dent people's savings and shake the bank system foundations due to capital outflow.

The government said the new tax aims to raise BGN 120 M and force richer people to pay taxes on the income they earn from bank deposits.

Banks in Bulgaria continue to record steady growth in savings, a trend which has been gaining momentum throughout the past half year, official data shows.

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