Bulgarian Economist Calls for Introduction of Differentiated VAT Rates

Chavdar Nikolov, Professor of International Economic Relations and Macroeconomics, photo by BGNES

Chavdar Nikolov, Professor of International Economic Relations and Macroeconomics, has suggested that the calls of a number of sectors for the introduction of differentiated VAT rates in Bulgaria is absolutely reasonable, adding that this is the case in most EU countries, especially as regards first necessity items.

In a Friday interview for the Bulgaria On Air TV channel, he condemned the practice of levying VAT on pharmaceuticals.

Nikolov, as cited by investor.bg, suggested that Bulgaria had a paradoxical tax system which relied solely on revenues from indirect taxes.

"By introducing the flat tax we closed all doors to reforms to the tax system. Any VAT tinkering now would open a budget gap," he stated.

He claimed that Bulgaria's 10% flat tax rate had had no impact on the economy, adding that the grey sector had not decreased; neither had collection rates gone up.

Nikolov argued that the only tax rate which could be changed at the current stage, taking into account the budget actualization, was the excise duty on cigarettes.

"If the excise duty on cigarettes is reduced, Bulgaria's budget will grow by an extra BGN 2 B which now circumvent the state coffers and enter the market through smuggling," he explained.

Nikolov expressed approval for the idea to take an external loan, adding that it had to be used for a particular purpose.

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