Bulgaria's Finance Ministry has published proposals to amend five tax laws, scheduled to go into effect on January 1 2011, largely to align the country's laws to European Union legislation, but also to increase Budget revenue.

One of the main changes affected ammortisation of company assets, lowering the annual rate of ammortisation. For machinery, the annual ceiling would be reduced to from 30 per cent to 20 per cent, while the computers and software ammortisation rate would be lowered from 50 per cent to 30 per cent, and the rate for cars would go down from 25 per cent to 20 per cent.

The longer ammortisation period would leave more funds as taxable profit in the near future. "The lower tax ammortisation levels will not result in higher medium an long-term taxes for companies. In the lifetime of the asset, the total size of tax profit will not be affected by the change, only the distribution of profit during that period," the ministry said in its reasoning for the bill.

The reason for the move, according to the ministry memo, was that "with economic growth slowing down, the assets are not being used as 'intensively' as during a period of high growth. In the current economic environment, the assets are being 'used up slower' compared to previous years, which is why it is more fortunate to reduce ammortisation in a way that reflects the reduced economic activity."

Bulgarian businesses, which have steadily lobbied in recent years for shortening ammortisation periods, are opposed to the proposal, Dnevnik daily said.

"We categorically disagree with the Finance Ministry's reasoning for reducing ammortisation rates. These are not luxury items, but instruments of business. We've been fighting for years to increase [the rates]," the executive director of the Confederation of Employers and Industrialists in Bulgaria, one of the largest employer associations in the country, Evgeni Ivanov, told the newspaper.

Other changes include a flat value-added tax rate for the tourism sector set at 14 per cent. Currently, tourist packages booked as group trips are taxed at seven per cent and individual packages are taxed at 20 per cent.

According to Dnevnik daily, the European Commission has notified the Cabinet that the separate tax rates were discriminatory and the amendment sought to redress the situation before the Commission started an infringement procedure. The flat rate could be negotiated down with the tourism industry unions so as not to harm one of the country's most lucrative sectors, the newspaper said.

Another change was to impose a 10 per cent tax on payments to off-shore companies, the Finance Ministry's reasoning being that the off-shore companies were often linked to the companies' owners and were being used to avoid taxes.

Changes to excise legislation would bring Bulgarian norms further in line with European Union standards, but also increased duties on fuels in line with Bulgaria's EU accession commitments. The amendments envisioned petrol excise duties rising from 685 leva for 1000 litres to 710 leva, while the duty on diesel fuel would increase from 600 leva for 1000 litres t 615 leva.

The Finance Ministry did not say how much the changes would bring in additional Budget revenue.