THE Government is preparing an increase in excise duties on alcoholic beverages, Finance Minister Milen Velchev told Bulgarian National radio on August 22. The details were scheduled for discussion at the Government’s regular meeting on August 26. The excise duty hike will push up the price of a half a litre bottle of beer by 0.025 leva and of a 0.7-litre bottle of any liquor by some 0.70 leva. The increase is inevitable and called for by the country’s upcoming accession to the EU. The additional tax revenue from the increase will be less than the revenue that the state budget will lose as a result of the upcoming cut in direct taxes, Velchev said. The additional revenue will be around 40 million leva, while the lost revenue will be over 300 million leva. The profit tax will be cut from 19.5 per cent to 15 per cent, the income tax by two per cent for all income brackets and five per cent for the highest (from 29 per cent to 24 per cent). The tax threshold will increase and family taxation will be phased in, shrinking tax revenue by 100-120 million leva a year, Velchev said. He also commented on his idea of a political consensus on long-term financing of education, and said that political parties represented in Parliament and others likely to make it into the next Parliament, will be invited to consultations on the project in September. Immediately after Velchev announcement of the hike in excise duties for alcoholic beverages, experts commented that even with this raise, in 2005 Bulgarian households will have more left in their pockets thanks to the cuts in direct income tax rates. According to the National Statistical Institute, the annual per capita consumption of alcohol in Bulgaria is 43.8 litres. The expected increase in excise duties will make the families where one of the spouses drinks pay 43.80 leva more. This is much less than the income tax they won’t be paying. Relief is also expected for smokers, because it is forecast that prices of expensive cigarettes may go down from the beginning of 2005, due to the new system of levying excise duties on them. Currently, excise duty on the cigarettes is 0,004 leva a piece, plus 43,5 per cent on the market price. We may make a certain re-balancing of the excise, Velchev said. This is to be done with the purpose of guaranteeing the successful privatisation of Bulgartabac Holding. Currently, the Cabinet fixes the prices of cigarettes and all other tobacco products at the beginning of each year. The prices have been constantly rising due to the forthcoming accession to the EU. From 2005 onwards, the administrative determination of the prices of cigarettes will be terminated. Changes will also be made to the mechanism for imposing fixed excise duties on tobacco products, and although it is not yet known what the new system will be, a fall in prices of cigarette packets is considered likely.