BULGARIA is among the countries with the lowest tax rates and the highest social security contributions in Central and Eastern Europe, a comparative survey by KPMG, published in Budapest Business Journal on November 8 shows.
The survey compares the tax systems of Bulgaria, Croatia, Romania, and Turkey and the ten countries that joined the EU in May 2004, including Hungary.
Cutting the corporate tax level is on the agenda in most countries of the Central and East European region. In some countries they went down from the beginning of this year, the publication says. Hungary is gradually losing its competitive edge in this field, while several negative attributes of its tax system are getting more visible.
According to the report, corporate tax rates are under 30 per cent in all the surveyed countries except for Malta and Turkey. The lowest rates are in the Baltic states, Cyprus (10 per cent) and Hungary (16 per cent). The highest rates are in place in Malta (35 per cent), Turkey (33 per cent) and Slovenia. Cyprus, in fact, makes state enterprises pay a corporate tax 10 percentage points higher than private ones, a unique example of enterprise-friendly taxing, the report found.
Hungary is the only one of the surveyed countries that maintains a revenue-based local business tax. A local business tax that resembles the Hungarian regime is in place in Lithuania, but it is at a rate of between 0.3 and 0.48 per cent, a fraction of the Hungarian one. There are quite a variety of local business taxes in the CEE region, such as property tax, tourism tax and communal tax, but the majority of these tax types do not constitute a major burden to businesses or private people, KPMG found out.
The report said that, although there is no major difference in the VAT rates in the surveyed countries, Hungary maintains the highest rate. The general VAT rate in Hungary is 25 per cent, which is three percentage points higher than that of the two second-ranked countries, Poland and Croatia. The report also found that there are at least two rates in the surveyed 14 countries. The discounted rate is set at or around five per cent, while the general rate ranges between 15 per cent and 25 per cent. The lowest VAT rate is in place in Cyprus (15 per cent.)
According to KPMG, along with a gradual decline in corporate tax rates, there has been no or little change in social security-related contributions in the surveyed countries. This applies both to contributions paid by the employer and ones paid by the employee. Malta and Cyprus have the lowest such contributions, while the highest social security and contributions rates were found in the Czech Republic, Hungary, Romania, Slovakia and Bulgaria.
Although in the Central and Eastern European region social security and contribution burdens are high, there is a payment ceiling both for employees and employers in some countries, such as Poland and Romania.
The report said personal income tax rates range between 12 per cent and 50 per cent in the surveyed countries. The lowest rates are in place in Slovakia (19 per cent) and the Baltic States. These countries use a flat income tax rate. Estonia is planning to cut its 26 per cent flat rate by two percentage points from next year, the report added.
More compliant
The reduction of the tax rates last year has led to improved tax compliance, Chief Tax Directorate head Nikolai Popov told a news conference November 5.
Individuals working under non-employment relationships paid 136 million leva in personal income tax by October 31, 2003 and 170 million leva by October 31, 2004. "This increase shows a substantial increase in the number of tax-compliant persons," Popov said.
Revenues from tax on personal income from employment relationships increased from 691 million leva by October 31, 2003 to 776 million leva by October 31, 2004.
A total of 859 million leva were collected in corporate tax by October 31, 2004, as against an annual target of 841 million leva.
According to Popov, unlike 1998 and 1999, the patent tax is gradually becoming pointless. So far this year, it has yielded revenue of 42 million leva.
A total of 709 000 declarations have been submitted under the Personal Income Taxation Act. The taxpayers who derelict their statutory obligation to file a declaration were 36 000 fewer than last year. The number of un-submitted statements dropped from 256 000 last year to some 220 000 in 2004. Of these, approximately 24 000 are on taxable income and the rest are of recipients of income below the tax threshold.
"The Exchequer has not sustained a loss from this, but tax legislation has nevertheless been breached," Popov said.
Ninety-three hundred companies have failed to submit information on the remunerations paid to persons who have worked for them under contracts of personal service, on a fee basis and other forms of non-employment relationships. As from 2005, companies are to submit this information electronically.
The survey compares the tax systems of Bulgaria, Croatia, Romania, and Turkey and the ten countries that joined the EU in May 2004, including Hungary.
Cutting the corporate tax level is on the agenda in most countries of the Central and East European region. In some countries they went down from the beginning of this year, the publication says. Hungary is gradually losing its competitive edge in this field, while several negative attributes of its tax system are getting more visible.
According to the report, corporate tax rates are under 30 per cent in all the surveyed countries except for Malta and Turkey. The lowest rates are in the Baltic states, Cyprus (10 per cent) and Hungary (16 per cent). The highest rates are in place in Malta (35 per cent), Turkey (33 per cent) and Slovenia. Cyprus, in fact, makes state enterprises pay a corporate tax 10 percentage points higher than private ones, a unique example of enterprise-friendly taxing, the report found.
Hungary is the only one of the surveyed countries that maintains a revenue-based local business tax. A local business tax that resembles the Hungarian regime is in place in Lithuania, but it is at a rate of between 0.3 and 0.48 per cent, a fraction of the Hungarian one. There are quite a variety of local business taxes in the CEE region, such as property tax, tourism tax and communal tax, but the majority of these tax types do not constitute a major burden to businesses or private people, KPMG found out.
The report said that, although there is no major difference in the VAT rates in the surveyed countries, Hungary maintains the highest rate. The general VAT rate in Hungary is 25 per cent, which is three percentage points higher than that of the two second-ranked countries, Poland and Croatia. The report also found that there are at least two rates in the surveyed 14 countries. The discounted rate is set at or around five per cent, while the general rate ranges between 15 per cent and 25 per cent. The lowest VAT rate is in place in Cyprus (15 per cent.)
According to KPMG, along with a gradual decline in corporate tax rates, there has been no or little change in social security-related contributions in the surveyed countries. This applies both to contributions paid by the employer and ones paid by the employee. Malta and Cyprus have the lowest such contributions, while the highest social security and contributions rates were found in the Czech Republic, Hungary, Romania, Slovakia and Bulgaria.
Although in the Central and Eastern European region social security and contribution burdens are high, there is a payment ceiling both for employees and employers in some countries, such as Poland and Romania.
The report said personal income tax rates range between 12 per cent and 50 per cent in the surveyed countries. The lowest rates are in place in Slovakia (19 per cent) and the Baltic States. These countries use a flat income tax rate. Estonia is planning to cut its 26 per cent flat rate by two percentage points from next year, the report added.
More compliant
The reduction of the tax rates last year has led to improved tax compliance, Chief Tax Directorate head Nikolai Popov told a news conference November 5.
Individuals working under non-employment relationships paid 136 million leva in personal income tax by October 31, 2003 and 170 million leva by October 31, 2004. "This increase shows a substantial increase in the number of tax-compliant persons," Popov said.
Revenues from tax on personal income from employment relationships increased from 691 million leva by October 31, 2003 to 776 million leva by October 31, 2004.
A total of 859 million leva were collected in corporate tax by October 31, 2004, as against an annual target of 841 million leva.
According to Popov, unlike 1998 and 1999, the patent tax is gradually becoming pointless. So far this year, it has yielded revenue of 42 million leva.
A total of 709 000 declarations have been submitted under the Personal Income Taxation Act. The taxpayers who derelict their statutory obligation to file a declaration were 36 000 fewer than last year. The number of un-submitted statements dropped from 256 000 last year to some 220 000 in 2004. Of these, approximately 24 000 are on taxable income and the rest are of recipients of income below the tax threshold.
"The Exchequer has not sustained a loss from this, but tax legislation has nevertheless been breached," Popov said.
Ninety-three hundred companies have failed to submit information on the remunerations paid to persons who have worked for them under contracts of personal service, on a fee basis and other forms of non-employment relationships. As from 2005, companies are to submit this information electronically.
