WHILE there is not much room to continue to cut taxes, there is still scope for the next government to continue the trend of recent years of tax reductions, Finance Minister Milen Velchev said on February 16.
Velchev was speaking at a business luncheon at the Sheraton Hotel hosted by the American Chamber of Commerce in Bulgaria.
He said that he saw an argument for a flat tax arrangement, and “would certainly recommend it if I was asked” about the subject.
There has been a series of tax reductions in Bulgaria in the past few years. Corporate tax was 28 per cent in 2001, which was reduced to 23.5 per cent in 2002, to 19.5 per cent in 2004, and in 2005 is 15 per cent.
In 2001, the top rate of personal income tax was 38 per cent and the lowest rate 20 per cent. After a series of reductions, the rate now is 24 per cent for the highest bracket and 10 per cent for the lowest.
Asked about the outlook for social security taxation, Velchev said that this, as another form of direct taxation, should be a priority for the next government to address.
With Value Added Tax (VAT) being comparatively high in Bulgaria, it could be cut to “perhaps” 18 per cent, Velchev said.
As the economy continued to grow, opportunities should be sought to lower social security taxation and in parallel with doing so, to shift the burden from employers to employees, with the goal being a 50-50 ratio, in compliance with practice in most European Union countries.
Velchev said that this should be done in a way so that, as the burden on the individual was increased, the overall burden from the combination with other taxes was decreased.
Asked about the taxation imposed on foreign exchange transactions, and whether this was an appropriate measure in the context of a free market economy, Velchev responded that it was a measure being taken in the context of an imperfect situation. While there were laws in place to prevent irregularities and abuses at foreign exchange bureaus, some people were vulnerable to exploitation because of loopholes in the law being taken advantage of by some traders.
Velchev said that a process of education was needed to prevent people being exploited because they did not have a thorough knowledge of the law, but said that such additional measures in relation to the industry were necessary because while it was possible for the government to have an education campaign for Bulgarians, the same was not possible for foreign tourists.
Velchev gave a presentation entitled “Bulgaria: investment update and EU outlook” in which he highlighted the country’s consistently strong economic performance, which he said was among the highest in Central and Eastern European countries. He said there was steadily growing output, positive inflation dynamics, a good fiscal track record with flexibility due to in-built stabilising factors, and he said that credit ratings of Bulgaria had been line with positive developments.
Unemployment had declined dramatically, while there was a stable and predictable business environment. He also quoted figures that he said showed how strategic investors had driven up foreign direct investment.
Velchev was speaking at a business luncheon at the Sheraton Hotel hosted by the American Chamber of Commerce in Bulgaria.
He said that he saw an argument for a flat tax arrangement, and “would certainly recommend it if I was asked” about the subject.
There has been a series of tax reductions in Bulgaria in the past few years. Corporate tax was 28 per cent in 2001, which was reduced to 23.5 per cent in 2002, to 19.5 per cent in 2004, and in 2005 is 15 per cent.
In 2001, the top rate of personal income tax was 38 per cent and the lowest rate 20 per cent. After a series of reductions, the rate now is 24 per cent for the highest bracket and 10 per cent for the lowest.
Asked about the outlook for social security taxation, Velchev said that this, as another form of direct taxation, should be a priority for the next government to address.
With Value Added Tax (VAT) being comparatively high in Bulgaria, it could be cut to “perhaps” 18 per cent, Velchev said.
As the economy continued to grow, opportunities should be sought to lower social security taxation and in parallel with doing so, to shift the burden from employers to employees, with the goal being a 50-50 ratio, in compliance with practice in most European Union countries.
Velchev said that this should be done in a way so that, as the burden on the individual was increased, the overall burden from the combination with other taxes was decreased.
Asked about the taxation imposed on foreign exchange transactions, and whether this was an appropriate measure in the context of a free market economy, Velchev responded that it was a measure being taken in the context of an imperfect situation. While there were laws in place to prevent irregularities and abuses at foreign exchange bureaus, some people were vulnerable to exploitation because of loopholes in the law being taken advantage of by some traders.
Velchev said that a process of education was needed to prevent people being exploited because they did not have a thorough knowledge of the law, but said that such additional measures in relation to the industry were necessary because while it was possible for the government to have an education campaign for Bulgarians, the same was not possible for foreign tourists.
Velchev gave a presentation entitled “Bulgaria: investment update and EU outlook” in which he highlighted the country’s consistently strong economic performance, which he said was among the highest in Central and Eastern European countries. He said there was steadily growing output, positive inflation dynamics, a good fiscal track record with flexibility due to in-built stabilising factors, and he said that credit ratings of Bulgaria had been line with positive developments.
Unemployment had declined dramatically, while there was a stable and predictable business environment. He also quoted figures that he said showed how strategic investors had driven up foreign direct investment.
