Bulgaria’s government plans to decrease VAT as of 2012 at the earliest, Finance Minister Simeon Djankov said at a seminar at the European Parliament on Thursday. Half a year after deciding not to raise the 20% value added tax, Bulgaria’s finance minister has made it clear he is set to even cut the rate as of 2012 at the earliest.
„This year there will be no Christmas bonuses for the people from the state administration, but we plan to decrease VAT as of 2012 at the earliest,“ Finance Minister Simeon Djankov said at a seminar at the European Parliament on Thursday.
He declined to specify the amount of the cut.
„The reduction of the VAT rate is a realistic goal as early as the end of next year, given that the parameters of the budget allow this. This goal will be definitely achieved by the end of the government’s term,“ he said, referring to the summer of 2013.
Minister Djankov described the healthy public finances, lower tax rates, infrastructure and center-right policy of the governments in new EU member states as „remarkable opportunities in the economic and political landscape“, which will help these countries to bottom out of the crisis.
After a series of U-turns Bulgaria’s government decided at the end of May to scrap plans for a VAT increase in a bid to plug a budget gap that has thwarted the new EU member’s efforts to join the euro in the near future.
The VAT increase has been a thorny issue in Bulgaria in the last few months with the cabinet changing their mind numerous times and several versions tossed around, ranging from 22% to 24%.
The VAT hike was proposed as part of a package of new austerity measures, which also include the introduction of a luxury tax, floating minority stakes in state-owned companies and a possible bond issue.
Politicians, analysts and trade unions took a firm stand against the hike, citing a long line of negative repercussions – an increase in the inflation rate, an expansion of the grey sector, a slow-down in the economic growth, in short a boost for the impact of the crisis.
Representatives from all business sectors cautioned that the hike in the value-added tax in Bulgaria should be a last-ditch measure, introduced only together with an overhaul in government expenditure and structural reforms.