Bulgaria Plans to Reintroduce 10% Bank Deposit Interest Tax

Bulgaria plans to increase tax on interest earned on bank deposits to 10% from next year, restoring the levy to its initial level, the head of budget commitee in Parliament Menda Stoyanova has said.

In an interview with Trud daily Stoyanova said on Friday the current minority coalition government of cenytre-right GERB and right-wing Reformist Bloc would propose to Parliament to scrap the planned gradual reduction of the tax on interest on bank deposits and reintroduce it at 10%.

The 10% tax was introduced from the beginning of 2013 by the previous GERB government (2009-2013), incorporating earnings on interest into Bulgaria's flat tax policy. Former Finance Minister Simeon Djankov said back then that the government wished to ensure the equal tax treatment of income by introducing the new levy.

The Socialist-led government that took office in 2013 and resigned in July 2014 decided to phase out the tax in steps of two percentage points a year. The first cut, to 8%, took effect from the beginning of 2014.

"I believe there is no reason to exempt that income from tax. What's more, in the context of KTB, public funds will used to repay BGN 3.6 B in guaranteed bank deposits and interest on them,""Stoyanova said.

The tax on deposit interest is a minor contributor to budget revenue compared to tax on other sources of income such as wages and property rent. In 2013, when the tax was at 10%, the Finance Ministry collected BGN 82.5 M from it.

With the tax rate at 8% since the beginning of 2014, the state has collected about BGN 52 M from the levy in the first nine months.

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