Bulgaria's Rulers Ok Deposit Tax at 2nd ReadingFinance | November 13, 2012, Tuesday // 17:41| views
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. File photo
Bulgaria's parliament approved at second reading on Tuesday the government's controversial proposal to levy a 10% tax on interest earned from bank deposits.
The Members of the Parliament decided to not tax the so-called termless deposits, saving accounts, child savings and current accounts.
The banks will be responsible for declaring the tax while only those who file written declarations with the National Revenue Agency, NRA, will be mandated to file declarations on tax from deposits.
Bulgaria's Finance Minister Simeon Djankov, who initiated the proposal, did not attend the parliamentary session.
The new 10% levy on people's income on their bank deposits is expected to come into force from next year.
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.
Deputy Finance Minister, Vladislav Goranov, quoted by the Bulgarian National Radio, BNR, explained that taxation on interest earned from deposits will be done at the time it is paid, even if the account was opened in 2013.
"If you work in 2012 and receive you wage in 2013 you will be taxed on 2013 income for labor in 2012. This is the same principle. The interest tax will apply for the income paid to you after January 1, 2013," said he.
The banks will deposit the tax in the State budget on monthly basis.
The opposition criticized the new tax, saying it will do more harm than good to the budget – fewer savings will reduce investments and opportunities for economic growth.
MP Pavel Shopov from the far-right nationalist Ataka party labeled the new tax a "legal insanity," while independent MP Darin Matov noted there is other income that could be taxed, stressing the BGN 120-140 M fiscal effect expected by the ruling GERB party will end up being BGN 20 M or less.
In commenting on the opposition worries that the new tax will affect mainly people with small savings and the retirees, Goranov replied: "One does not need money in the Otherworld."
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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