Bulgaria MPs Ok 20% Renewable Energy Tax, Defy Protests

Renewable energy producers have staged numerous protests against a proposed 20% tax on their revenues in front of the Council of Ministers building in Sofia. Photo by Sofia Photo Agency

Bulgaria's parliament has approved conclusively a highly controversial new tax on revenues of renewable energy producers amid a wave of protests against it.

The proposal was supported Thursday morning by 116 MPs, 38 voted against and 28 abstained.

The proposal to introduce a new 20% tax on the revenues of photovoltaic plants and wind farms through changes to the Renewable Energy Sources Act was submitted by Volen Siderov, leader of nationalist party Ataka, during the second-reading vote on Budget 2014 by the parliamentary committee on budget and finance.

On Saturday, representatives of the Bulgarian Socialist Party (BSP) and liberal party Movement for Rights and Freedoms (DPS) announced that they would back the measure in Parliament.

In a media statement issued Monday, the Ministry of Economy and Energy (MIET) defended vehemently the proposal citing the Czech Republic as an example, where the tax rate on preferential prices there amounted to 26-28%, while in Greece - to 30%.

MIET informed that Italy, Spain, Romania and the UK had also introduced measures to reform the support schemes for renewable energy.

Citing guidelines of the European Commission, MIET noted that "preferential prices are applied for the purpose of maintaining low risk levels for investors in new technologies.

With the development of technologies, they acquire a substantial share of the total output, so this type of protection is not necessary and must be terminated within a certain period."

The Ministry added that an EU Directive required Bulgaria to reach a 16% share of electricity produced from renewable energy and the country already boasted a 15% share.

MIET also argued that the tax would be a step towards overcoming the sharp discrepancies between prices of different producers operating on the regulated market, adding that it would also have a balancing impact on the electricity system.

Meanwhile renewable energy producers have staged numerous protests against the proposed tax.

They have complained that many of them had developed their businesses through loans from banks and the imposition of such a tax on their turnover would substantially complicate their situation.

In a media statement, the Bulgarian Photovoltaic Association defined the decision for the new tax as scandalous, opaque, discriminatory, and illegal.

Industry representatives insisted that the measure would discourage foreign and local investors from the most successful sector of the Bulgarian economy which had absorbed over EUR 4 B of investments and created thousands of jobs.

Nikola Nikolov from the BPVA underscored that the tax was unconstitutional and the state offered no service in exchange for it.

In an interview for the Bulgarian National Radio, Ruslan Stefanov from the Center for the Study of Democracy argued that the measure would trigger a wave of bankruptcy of renewable energy companies and referred to the proposal as an example of opaque governance.

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