Two months after the Finance Ministry announced its intention to increase excise duties on hard liquor and cigarettes, three other industries found themselves threatened by the same idea.   

The gambling industry, brewers and lawyers all raised voices against planned or already announced increase in gambling tax, beer excise duty, and VAT on lawyers’ fees.   

First was the gambling sector, when on October 29 Ivan Kostov, one of the two leaders of the right-wing Blue Coalition, surprisingly asked for a ban on gambling because the revenue it contributed to the Budget was insignificant compared to the negative impact gambling had on society.   

"Those who lobbied to keep gambling free of excise duties lied when they said it would bring profit to the Budget, but the truth is that this has not happened. That is why I say gambling should be banned, because it does not bring revenue but damage and the only people who benefit from it are the gambling bosses," Kostov told Bulgarian news agency Focus.

Although Kostov’s idea came across as too radical, it was enough to put gambling on the agenda weeks before the 2010 Budget is due to be adopted. What happened next is that Parliament started discussing unifying the tax rate on gambling. Currently, gambling on sports is taxed at 10 per cent of revenue, while all the other gambling games, such as lottery, casino games and bingo, are levied 12 per cent tax.

The idea is that as of next year, all gambling games would pay 12 per cent tax or, in other words, the sport gambling tax will be increased. This would mostly affect Bulgaria’s largest bookmaker, Eurofootball.

The company said that the increased tax would have a negative effect on the industry, which employed about 80 000 people, and would not lead to more revenue to the Budget as the industry’s revenue was already down 40 per cent. According to the company statement, the 12 per cent tax rate would bring about 30 million leva in losses for the sector in 2010.
According to Finance Ministry calculations, the two percentage point increase would bring a further 12 million leva to the Budget every year. Legislators should raise revenue collection from the gambling industry by concentrating on better regulation of the online gambling business, which could bring as much as 160 million leva more to the Budget annually, Eurofootball said. The bookmaker has long lobbied for government regulation of online gambling, which, Eurofootball argues, is illegal because none of the major international betting websites are licensed as bookmakers in Bulgaria.

Bold moves
The issue with lawyers’ fees surfaced in November, when it became clear that an amendment to the VAT Act is about to be adopted, which would include lawyers in the list of professions that will have to pay VAT. The amendment followed a warning letter from the European Commission, which said that VAT-free lawyers’ fees was not in compliance with European Union legislation.

The amendment was vehemently protested by bar unions, who said that it would raise a financial obstacle for people using legal representation, as the VAT would be covered by the client, not the lawyers.

Their voices have been heard and now both lawyers and Parliament are discussing ways to persuade the EC to drop its request, which leaves the issue in the hands of the European Commission.

Finance Minister Simeon Dyankov might have failed in getting the support of Prime Minister Boiko Borissov for raising the excise duty on hard liquor, but this did not stop him from considering a plan to raise the duty on beer.

According to Bulgarian-language Dnevnik daily, the ministry was considering an increase in beer excise duty. Currently, excise duty on beer is 1.50 leva a hectolitre/degrees Plato, ranging from 0.075 to 0.082 leva a bottle. The Union of Brewers in Bulgaria were surprised by the news, according to Dnevnik, saying that the industry union has not been approached on the matter, but warning that such a move would be a heavy blow to local brewers and related sectors.