In a sudden change of mind, Bulgaria’s Prime Minister Boyko Borisov said the government will on May 5 raise the current 20% value-added tax (VAT) rate by more than 2 percentage points, as the online English edition of Dnevnik Daily informs.
Government experts are discussing options for a 23% or 24% increase, aiming to quickly get the unpopular measure to boost revenue through parliament and potentially introducing it as soon as June 1. The upcoming hike which economists say would trigger a matching increase in prices sparked fierce criticism from both employers and unions. Analysts labeled the proposal “a replacement for reforms in ineffective systems.”
The government is unlikely to face any opposition from parliament. Ruling party MPs, including budget committee Chief Menda Stoyanova, who initial opposed the measure, now threw her weight behind the last-ditch step as the only option on the table.
If it rolls out the new tax from June, the Bulgarian government may raise an estimated BGN 507 million to BGN 670 million by the end of the year, depending on what rise it opts for.
National Revenue Agency (NRA) executive director Krasimir Stefanov said earlier this week that tax revenue collected by April 17 underperformed the year-ago figure by BGN 600 million.
“A vast gap is gaping wide open in the budget. It can only be bridged through higher revenue […] or higher VAT,” Borisov told state-run broadcaster BNT on Thursday. “If the other 60 [stimulus] measures postpone tax collection, we’ll lift VAT as a temporary measure.”
The premier noted that as soon as the other stimulus measures begin to produce tangible results, the government will start lowering VAT and take it beneath 20% by the end of its term.
Source: focus-fen.net
