Less than two months after Parliament approved amendments to the Corporate Income Act, increasing the unified tax rate on all gambling activities from 10 per cent to 15 per cent of revenue, proposed changes to the Gambling Act are set to lower the taxes on gambling establishments.

The Finance Ministry, having dusted off a long-anticipated bill of amendments to the Gambling Act, is now proposing to tax gambling operators 25 per cent of the difference between revenue and the winnings paid out.

In its reasoning, posted alongside the amendments bill on the ministry’s website for public feedback, the ministry said that the general principle of all direct taxation is that it is a share of the profit that is paid as tax.

"In order to achieve equality, we should apply the same principle of taxation to all businesses. Subtracting the winnings paid from the total amount of bets with gambling operators would lead to a more fair and just calculation of the tax base," the ministry said.

"The change would bring a relative base of comparison for the tax base of gambling operators and the tax base of other companies." In real terms, the change would result in lower taxes for gambling operators because they are required by law to pay out winnings that equal at least 50 per cent of the amount they take in as revenue, whether as bets or from the sale of tickets.

Should operators choose to pay the minimum specified by law, the taxes paid would total 12.5 per cent of their revenue, rather than the 15 per cent rate in effect since January 1 2010.

Anticipating criticism of the move, the ministry emphasised that the gambling industry would still pay higher taxes than the rest of the economy. "Even after the change, the gambling operators would be put in a less advantageous situation than other corporate entities because their tax rate will be 2.5 times higher than that of other companies," the ministry said. Furthermore, unlike other corporate entities, which have all spending deducted before taxation, gambling operators would not be able to deduct administrative and other business costs from the amount being taxed.

The bill is still at the public feedback stage, a mandatory step before it can be presented to Cabinet. It has already come under criticism from Ivan Kostov, a former prime minister and co-chairperson of the right-wing Blue Coalition, which backs the Cabinet but is not officially part of the government.

Kostov, who is among the proponents of banning gambling in Bulgaria, said on January 17 that it was "a retreat from one person who has monopolised these areas" and the result of lobbying with government.

Kostov did not identify the person, but it was a transparent reference to Vassil Bozhkov, believed to be Bulgaria’s richest person, who is reported to still control the country’s biggest bookmaker Eurofootball. Bozhkov said in 2009 that he had "very few business interests in gambling".

On November 26 2009, the day Parliament approved the amendments raising the tax rate on gambling activities to 15 per cent, Bozhkov lashed out at Kostov, whom he called a "liar" and the "father of corruption in Bulgaria", accusing Kostov and Finance Minister Simeon Dyankov of "genocide of Bulgarian business".

Eurofootball said that, at a time when Parliament was considering raising the tax rate to only 12 per cent, that the increase would have a heavy impact on the industry, which employed about 80 000 people, and would not lead to more revenue to the Budget because the industry’s revenue was already down 40 per cent. According to the company statement, raising the tax rate from 10 per cent to 12 per cent would bring about 30 million leva in losses for the sector in 2010.